Real Estate Trust Account Requirements

Trust Account Requirements

• Property managers must deposit all funds received on behalf of others into a trust account within three business days.
• Trust accounts must be liquid, readily accessible, insured in Montana financial institutions, identified as trust accounts, and reconciled monthly.
• Trust accounts cannot be sweep accounts or invested in certificates of deposit, repurchase agreements, or any other investment that places funds at risk.
• Multiple trust accounts can be maintained separately for each owner or property.
• Trust accounts may be interest-bearing, with interest payable to the property manager as consideration for services.
• No more than $1,000 of personal funds can be deposited in a trust account.
• Personal funds may be used for trust account bank charges, related trust account maintenance expenses, and when due and payable to the property manager.
• Money due to the property manager must be withdrawn within ten business days of becoming due and payable.
• When managing one's own real estate, property managers must deposit security deposits into a trust account.
• Rents are not required to be deposited into a trust account if the property manager owns 100% of the real estate.
• If rents are included in a trust account, all disbursements must be described in the property management agreement.
• Disbursements may not be considered personal indebtedness if used for the maintenance of the property itself.
• Property managers must maintain complete and chronological records of all trust account funds received and disbursed, including personal funds.
• Each record must include a running balance and clearly identify all transactions, including dates, parties, payees, and sources of funds, and the amounts received, disbursed, and deposited.
• Upon termination of a property management agreement, the property manager must notify the tenant in writing within five business days of the termination and transfer all funds and current tenant files to the property owner or designee within 30 days.
• Property managers must maintain all trust account records, complete files of properties managed, and all related documents for at least eight years from the property management agreement termination.

Trust Accounts and Property Management

• Purpose: To separate funds held in trust from the property manager's operating funds.
• Legal Arrangement: A third-party holds the funds, ensuring they are not commingled with the property manager's assets.
• Benefits:
  • Protects funds from becoming part of the property manager's estate in case of death.
  • Safeguards funds from judgments against the property manager.
  • Provides individual accounting for all transactions, facilitating auditing.
• Requirement: At least one trust account is required for property management.
• Individual Ledgers: Keep separate ledgers for each property and owner.
• Content: Rent, deposits, earnest money, and other funds not belonging to the property management company go into the trust account.
• Trust Account Necessity:
  • Prevents commingling of funds.
  • Allows for easier tracking of all monies.
  • Eliminates the need for a separate account for every principal or third party.

Penalty for Failure to Comply with Trust Account Requirements

• An employee of the department can issue a citation to a property manager for failing to comply with trust account maintenance requirements.
• The citation must include specific details:
  • Time and date of issuance
  • Name, title, mailing address, and signature of the issuing employee
  • Reference to the violated statute or rule
  • Name, title, and mailing address of the cited property manager, along with instructions on paying the fine or disputing the violation
  • The amount of the applicable fine, which is $1,000 per violation.
• The issuing employee is authorized to collect the fine and deposit it into the state special revenue account for the board.
• The cited property manager can choose to pay the fine or file a written dispute with the department within 5 business days of the citation's issuance.
• Refusal to sign and accept the citation without filing a written dispute is considered unprofessional conduct.