Does Your Property Management Company Have an Audited Trust Account?

April 7, 2016

The Real Estate Agents Authority, the government agency that regulates New Zealand’s real estate industry, dictate that all money received in real estate transactions be paid into an audited trust account. This law, however, does not extend to the largely unregulated sector of residential property management. As a result, many property management businesses conduct transactions through their company’s bank account, which is not an acceptable practice from our perspective. At First Avenue, we pride ourselves on our integrity – operating an audited trust account is just one way that we demonstrate this. 

What is an audited trust account?

Trust accounts are a special type of bank account that is used for a variety of purposes in both the private and public sectors. These accounts are most often set up in instances where an individual or a company is holding or managing money for a beneficiary. The account is administered by trustees and governed by a legal document that establishes the rules of the trust. An audited trust account is a trust account that undergoes routine audits by an independent party to ensure that all transactions have been carried out legally and are in agreement with the terms of the trust.

The role of audited trust accounts in property management companies

At First Avenue, we use an audited trust account to receive rent monies paid by tenants of the properties we manage. This money is kept separate from our other business transactions, ensuring that the money will be available to pay our clients (the property owners) their rental income at the end of each month.

We believe the use of audited trust accounts should be standard practice, but that’s not the case. Over the years, we have heard numerous stories of property management companies using tenant rent monies to cover internal costs during the month, causing them to fall short when it’s time to pay the property owners. We’d like to see better regulation put in place to ensure this never happens, but, unfortunately, that doesn’t seem likely in the near future. In the meantime, we can assure our clients that their rent money will be available on the agreed date.

Choosing the right property management company

When selecting a property management company to protect and manage your investment, it’s critical that you look for trustworthy companies that are of good standing in the community. Be wary of any company that does not operate an audited trust account. Rental income is your money. It does not belong to the property management company to use at their discretion.

Ensure that your assets are protected by choosing a property management company that has an audited trust account. At First Avenue, we are happy to share the results of our regular audits with any prospective or existing client who would like to see them. We think that any reputable company should be happy to do the same. 

Photo credits:
Homeownership by Mark Moz, CC-BY-2.0

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Filed under Property management

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