Colorado Property Managers: Our Property Management Lawyers Want You to Learn From These Mistakes!
In a recent press release, the Colorado Real Estate Commission announced the suspension of a Colorado Springs property manager’s real estate license and property management company license. The release stated that “… staff investigators found evidence of misconduct and license law violations.”
The alleged violations included:
- The failure to collect and account for security and other deposits and other funds received;
- The conversion, diversion or commingling of funds belonging to others;
- Maintaining an unworthy and incompetent practice;
- Failing to disclose affiliated business relationships; and
- Failing to comply with documentation and record-keeping requirements.
The suspensions were immediate and both the broker and the company now face fines and the permanent loss of their licenses, reports the Colorado Springs Gazette.
According to the Gazette, the broker’s husband and co-owner of the property management company said they have been wrongfully accused and that the mistakes and thefts were committed by property management and investment firms that the accused property management company acquired in the recent years.
This case is a good reminder to be vigilant about handling, managing, and tracking money that belongs to clients or renters in accordance with the law. Here’s a quick review of what Colorado law says about the commingling of funds, documentation and record-keeping.
Commingling of funds
Colorado law requires real estate brokers and real estate companies to keep all “money belonging to others,” such as security deposits, in one or more separate accounts. Basically, in the case of, say, a renter’s security deposit that money legally belongs to the renter so the law requires it to be placed in an escrow account to help prevent accidental or intentional spending of the funds for personal use.
“Illegal commingling of funds” occurs when:
- a beneficiary’s cash balance (the owner of the money held in an escrow account is the “beneficiary”) is overspent or misused, meaning the funds are stolen or borrowed or loaned without authorization.
- “failing to deposit” funds into an authorized account
- “failing to account for” the activity performed
- “misrepresenting” the status of financial information to others
- Other on-going uncorrected accounting errors
The following practices may occur in tandem with the illegal commingling of funds:
Documentation and record-keeping
An employing broker is obligated to maintain accurate records for any trust or escrow accounts – each escrow bank account must have a corresponding set of office accounting records – as well as company transaction records.
Robinson & Henry’s real estate attorneys, led by Don Eby, work with property managers to ensure their business practices are in line with the law, and are here to help if you find yourself accused of a violation like those listed above. Contact us today to request an assessment.