Magazine article Journal of Property Management

Know Your Code of Professional Ethics: Protecting Client Funds

Magazine article Journal of Property Management

Know Your Code of Professional Ethics: Protecting Client Funds

Article excerpt

WHEN A CLIENT HIRES A PROPERTY MANAGER TO MANAGE HIS PORTFOLIO, HE IS EXPECTING THE MANAGER WILL EXERT DUE DILIGENCE to make sure the funds are deposited in a fiduciary account in an insured financial institution. The client also expects those funds will not be commingled with personal, company or other client funds. The client's funds will only be used for expenses of the client and never for the benefit of another client or any other person. The property manager must act to make sure the funds are at all times protected against any reasonable or foreseeable contingencies and losses.

There is a high level of responsibility in managing client funds, and there have been several incidents where charges have been filed against an IREM Member for violations within the Code of Professional Ethics. Below are highlights from two cases involving members:

CASE ONE

This case Involved an ARM[R] who was applying for CPM[R] candidacy. It was discovered that a real estate license restriction was imposed on the ARM, due to the mishandling of trust funds. The Ethics Board found the respondent violated the Code, specifically Article 4. Protection of Funds and Article 10. Compliance with Laws and Regulations. As the respondent was already taking appropriate measures to rectify the findings, the Hearing Board allowed the application to proceed with the proviso that the respondent complete a course on trust fund accounting and take the IREM ethics course.

Trust or reserve funds require special handling to make sure the funds are in a safe, insured financial institute. It is never advisable to place the money in stocks or bonds where funds can go up or down, unless this is specifically desired by the client and reviewed every month. It is better to be "safe than sorry" and being conservative rather than aggressive with client funds. …

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