The importance of a secure trust account for real estate agents
Real estate agencies hold many millions of dollars in their trust accounts. These funds are held ‘in trust’ for clients and customers of the agency. It is one of the fiduciary duties of an agent to keep their clients’ funds safe. A fiduciary duty is the highest standard of care in equity or law.
There are very strict processes and procedures outlined in the agent legislation for managing these trust funds, including accounting to clients or customers. It is essential to remember the trust account money belongs to other people. Removing money from the trust account for a reason other than one that is lawful and appropriate is a criminal offence. If an agent misappropriates money, the correct term is ‘defalcation’ of trust monies, it can lead to the loss of their real estate licence as well as a prison sentence.
Trust money must be kept separate from the agent’s general operating account, and trust money is not available to be used for the payment of the debts of the licensee or their staff. A real estate agent’s good reputation is one of its biggest and most important assets. A good reputation ensures the confidence and trust of all the stakeholders in the agency such as clients, customers, suppliers, investors, regulators and employees. This confidence ensures ongoing profitability and creates increased opportunities to grow the business.
Keeping the trust account safe and secure involves good business practices in the agency, understanding cyber security risks, selecting ethical and honest employees to work in the agency, and finally the agency licensee closely supervising the trust account transactions.
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