Or. Admin. Code § 863-025-0025

Current through Register Vol. 63, No. 11, November 1, 2024

Section 863-025-0025 - Clients' Trust Account and Security Deposits Account Requirements

(1) All clients' trust accounts and security deposits trust accounts must be federally insured bank accounts.

(2) A property manager must open and maintain at least one clients' trust account as defined in OAR 863-025-0010.

(3) Only the following funds may be held in a clients' trust account:

(a) Funds received by the property manager on behalf of an owner; and

(b) Interest earned, but only if the account is a federally insured interest-bearing account and the property management agreement complies with OAR 863-025-0020(3).

(4) Except as provided in section (7) of this rule, a property manager who receives security deposits on behalf of an owner must open and maintain a security deposits account, as defined in OAR 863-025-0010, that is separate from the property manager's clients' trust account.

(5) Except as provided in section (7) of this rule and OAR 863-025-0030, a property manager who receives a security deposit on behalf of an owner must deposit the security deposit into the property manager's security deposits account within five banking days after receipt.

(6) Only the following funds may be held in a security deposits account:

(a) Security deposits as defined in OAR 863-0025-0010; and

(b) Interest earned, but only if the account is a federally insured interest-bearing account and the property management agreement complies with OAR 863-025-0020(3) and the tenant has provided the property manager with written approval required in 863-0035-0025(24).

(7) When a property management agreement and a corresponding lease or rental agreement provide that the security deposit will be transferred to and held by the owner, the security deposit funds must be deposited in the clients' trust account and disbursed to the owner in the month in which they are received.

(8) If interest earned in a clients' trust account under section (3)(b) of this rule or in a security deposits account under section (6)(b) of this rule inures to the benefit of the property manager, such interest must be disbursed to the property manager within ten calendar days from the date of the bank statement on which such interest first appears.

(9) A property manager may not allow an owner to be an authorized signer on a clients' trust account or security deposit account and may not allow an owner to deposit, hold or disburse funds in a clients' trust account or security deposit account.

(10) A property manager must be an authorized signer on each client's trust account and each security deposits account and is solely responsible for the receipts and disbursements on each bank account.

(11) A property manager must maintain and account for all checks used for a clients' trust account or security deposits account including, but not limited to, voided checks. All such checks must:

(a) Include the account number;

(b) Be pre-numbered or, if checks are computer-generated, must be numbered consecutively;

(c) If the account is a clients' trust account, include the words "clients' trust account," but may include additional identifying language; and

(d) If the account is a security deposits account, include the words "clients' trust account - security deposits," but may include additional identifying language.

(12) A property manager must not disburse funds from a clients' trust account or security deposits account unless there are sufficient funds, as defined in OAR 863-025-0010, in the ledger account against which the disbursement is made.

(13) A property manager may only transfer funds from an owners' ledger account to one or more different owners' ledger accounts if:

(a) Each of the affected owners authorizing the transfer have signed and dated an agreement authorizing such transfer that is separate from any property management agreements;

(b) At the time of the transfer, the property manager enters the transfer information on each affected owners' ledger account, including but not limited to the amount of the transfer, date of the transfer and the source or destination of the transferred funds, as appropriate; and

(c) The property manager gives each owner a separate monthly accounting on the transfer or includes the accounting of the transfer activity in the regular monthly report to the owner.

(14) A property manager may only transfer funds between two or more owner's ledger accounts maintained for the same owner if:

(a) The owner has given the property manager prior written approval in the property management agreement or in an addendum to the agreement; and

(b) At the time of the transfer, the property manager enters the transfer information in each of the owner's affected ledger accounts including, but not limited to, the amount of the transfer, date of the transfer and the source or destination of the transferred funds, as appropriate.

(15) A property manager must disburse earned management fees from the client's trust account at least once each month unless a different schedule of disbursement is specified in the property management agreement, and may only disburse such fees if sufficient funds are available.

(16) The monthly cycle for a clients' trust account or security deposits account may begin and end on a stipulated date every month, if the date is consistent from month to month.

(17) A property manager may not disburse funds from a clients' trust account or security deposits account based upon a wire or electronic funds transfer deposited into the account, until the deposit has been verified by the property manager. The property manager must arrange with the account depository and other entities for written verification of when funds are received or disbursed by wire or electronic transfer.

(18) Upon request by the commissioner or an authorized representative of the commissioner, a property manager must demonstrate that a sufficient credit balance, as defined in OAR 863-025-0010, existed in a ledger account at the time of a disbursement is made from a clients' trust account or security deposits account by producing financial records showing that such disbursement did not involve the use of any other owner's or tenant's trust funds.

(19) A property manager may not utilize any form of debit card issued by financial institutions on a client trust account or security deposits account.

(20) A property manager must reconcile each clients' trust account within 30 calendar days of the date of the bank statement pursuant to the requirements contained in this section.

(a) The reconciliation must have three components that are contained in a single reconciliation document:

(A) The bank statement balance, adjusted for outstanding checks and other reconciling bank items;

(B) The balance of the record of receipts and disbursements or the check register as of the date of the bank statement; and

(C) The sum of all positive owners' ledgers as of the date of the bank statement.

(b) The balances of each component in section (20)(a) of this rule must be equal to and reconciled with each other. If any adjustment is needed, the adjustment must be clearly identified and explained on the reconciliation document.

(c) Outstanding checks must be listed by check number, issue date, payee and amount;

(d) Within 30 calendar days from the date of the bank statement, the property manager must:

(A) Complete the reconciliation document; and

(B) Sign and date the reconciliation document, attesting to the accuracy and completeness of the reconciliation; and

(e)The property manager must preserve and file in logical sequence the reconciliation document, bank statement, and all supporting documentation including, but not limited to, copies of the record of receipts and disbursements or check register and a listing of each owner's ledger balance as of the date of the bank statement.

(21) A property manager must reconcile each security deposits account within 30 calendar days of the bank statement date pursuant to the requirements contained in this section.

(a) The reconciliation must have three components that are contained in a single reconciliation document:

(A) The bank statement balance, adjusted for outstanding checks and other reconciling bank items;

(B) The balance in the records of receipts and disbursements or the check register as of the date of the bank statement;

(C) The sum of all positive balances of individual security deposits and fees held in the security deposits account.

(b) The balances of each component in section (21)(a) of this rule must be equal to and reconciled with each other. If any adjustment is needed, the adjustment must be clearly identified and explained on the reconciliation document;

(c) Outstanding checks must be listed by check number, issue date, payee and amount;

(d) Within 30 calendar days of the date of the bank statement, the property manager must:

(A) Complete the reconciliation document; and

(B) Sign and date the reconciliation document, attesting to the accuracy and completeness of the reconciliation; and

(e)The property manager must preserve and file in logical sequence the reconciliation document, bank statement, and all supporting documentation including, but not limited to, copies of the record of receipts and disbursements or check register and a listing of all balances of individual security deposits and fees as of the date of the bank statement.

(22) A property manager must take corrective action to resolve all adjustments made in a reconciliation prior to the next reconciliation or document the good faith efforts the property manager has taken to resolve the adjustment.

(23) A property manager may delegate the property manager's authority to review and approve reconciliations and to receive and disburse funds for a clients' trust account or security deposits account to another person if the property manager complies with the provisions of OAR 863-025-0015; however, the property manager remains solely responsible for all funds and transactions.

(24) A property manager may place security deposits received by the property manager in a federally insured interest-bearing security deposits account if:

(a) The property management agreement includes a provision for such an account under OAR 863-025-0020(3);

(b) The tenant or tenants whose security deposits are deposited into such account have provided written approval for such an account; and

(c) The provisions in the property management agreement and the written approval of the tenant specify to whom and under what circumstances the interest earnings will accrue and be disbursed.

(25) The property manager's interest in or disbursement to the property manager of interest earnings from a clients' trust account or security deposits account is not a commingling of trust funds with a licensee's personal funds.

(26) A property manager must record the transfer of any funds from a clients' trust account or security deposits account by a check, by written proof of transmittal or receipt retained in the property manager's records. The property manager must record the transfer of other documents by written proof of transmittal or receipt retained in the property manager's records. A property manager may transfer funds electronically via the Internet or Automated Clearing House (ACH) software from a client's trust account to a bank account maintained by the owner and a property manager may make payments electronically to a vendor's account for expenses relating to the owner's property. If the software program used for the transfer does not automatically update the owner's ledger, the property manager must manually record the transfer in the owner's ledger. At the time the transfer is made, the property manager must print and preserve a hard copy of the electronic record of the transfer.

(27) A property manager may use a bank lockbox process in which the bank collects payments from tenants, creates an electronic record of the transaction, and deposits the payments into the appropriate clients' trust account by following the written instructions of the property manager only if the lockbox process is authorized in a property management agreement and:

(a) The property manager is responsible for determining that the lockbox process and lockbox software program provide controls adequate to ensure the security of the funds and to provide an accurate accounting for them;

(b) For the purposes of this rule, the bank is considered an agent of the property manager; and

(c) The software program for the lockbox process must permit monthly reconciliations of the accounts into which the deposits are made and printing of daily deposit records for the period of time required for retention of other records.

Or. Admin. Code § 863-025-0025

REA 1-2002, f. 5-31-02, cert. ef. 7-1-02; REA 1-2003(Temp), f. 2-27-03, cert. ef. 2-28-03 thru 8-27-03; REA 3-2003, f. 7-28-03, cert. ef. 8-1-03; REA 1-2005, f. 5-5-05, cert. ef. 5-6-05; REA 2-2006(Temp), f. 9-11-06, cert. ef. 9-15-06 thru 3-12-07; REA 1-2007, f. & cert. ef. 3-12-07; REA 8-2008, f.12-15-08, cert. ef. 1-1-09

Stat. Auth.: ORS 183.335 & 696.385

Stats. Implemented: ORS 696.241, 696.280 & 696.361