ADRE Model Broker Policy Manual-Property Management

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Property Managementdownload

If the Company allows property management, this section should cover:

  • Transaction records for property management transactions must be kept for three years.
  • Residential leases must be maintained for one year from the expiration of the agreement or until the agreement and related documents are given to the property owner at the termination of the property management agreement. The Company must maintain non-residential lease agreements in accordance with A.R.S. § 32-2175(F).
Quick Quiz

Fill in the Blank:

Transaction records for property transactions must be kept for three years.

32-2175. Property management records; requirements; audits

F. Property management firms shall maintain each nonresidential real estate lease agreement and the transaction folder in which it is kept in a chronological log or other systematic manner that is easily accessible by the commissioner or the commissioner’s representatives. For nonresidential lease transactions, transaction folders shall contain:

1. Confirmation that the deposits or other monies that were handled by or through the broker were handled according to instructions given by or agreed on by the parties to the transaction.

2. A complete copy of the nonresidential lease or rental agreement.

3. If applicable, a copy of the listing agreement.

G.Residential leases must be maintained for one year from the expiration of the agreement or until the agreement, and related documents are given to the property owner at the termination of the property management agreement.A broker is not required to maintain duplicate residential rental transaction folders.

Quick Quiz

Fill in the Blank:
Residential leases must be maintained for year from the expiration of the agreement.

  • The records that must be kept include property management agreements; copies of earnest money receipts; closing statements (showing receipts, disbursements, adjustments); lease or rental contracts, and listing agreements (if applicable).

Pursuant to A.R.S. § 32-2173, a property management firm shall write property management agreements in clear, unambiguous language, and the property management agreements shall:

  • State all material terms and conditions of the property management firm’s services, obligations, duties and responsibilities to the property owner.
  • Be signed by the property owner or his agent and the property management firm’s designated broker or the broker’s authorized real estate licensee.
  • Specify a beginning and an ending date.
  • Contain cancellation provisions that are agreeable to both parties.
  • Provide for the manner of disposition of all monies collected by the property management firm, including any tenant deposits.
  • Specify the type and frequency of status reports to the owner.
  • State the amount and purpose of monies the property management firm holds as an operating reserve for emergency and other purposes.
  • Provide for the disposition and allocation of interest earned on trust account monies.
  • State the terms and conditions of compensation the property owner pays for services according to the property management agreement.
  • Not be assigned to another licensee or licensed entity without the express written consent of the property owner.

Property management agreements may:

  • Contain an automatic renewal provision, if the property management firm sends imagesthe owner a reminder notice at least thirty days before the renewal date. The notice does not negate any other cancellation term otherwise agreed to.
  • Provide for reasonable liquidated damages or cancellation fees for early termination of the agreement.
  • Allow the property management firm’s broker to authorize a licensed or unlicensed person in the direct employment of the broker, under section 322174, subsection C, to transfer monies from or to be a signatory on a property management trust account to which the property management firm deposits the owner’s monies.
  • Require more than one signature on checks written from a property management account.
  • Contain any other provisions that are agreed to between the property management firm and the owner and that are not in conflict with the requirements of this chapter.
Quick Quiz

Fill in the Blank:

more than one signature on checks written from a property management .

Immediately on termination of a property management agreement, the property management firm shall provide the owner with:

  • All originals or other copies of all rental agreements or related documents in the property management firm’s possession for current and previous tenants. These documents shall include any applications, property inventories, leases, pet permits, default notices, lease amendments or addenda in the property management firm’s possession. The broker is not required to keep copies of residential rental lease agreements or related rental lease documents after termination of the property management agreement.
  • All building plans environmental studies, conditions, covenants and restrictions, inspection reports, contracts, keys, warranties, personal property or other documents in the possession of the property management firm.

On termination of the property management agreement the property management firm shall provide the owner with a final accounting of the property’s financial status that includes at a minimum:

  • Within five days, a list of all tenant security obligations.
  • Within thirty-five days, reimbursement for all monies remaining in the property accounts maintained by the property management firm, except for monies needed for unpaid obligations incurred during the term of the property management agreement.
  • Within seventy-five days, a final account receivable and payable list.
  • Within seventy-five days, a final bank account reconciliation.
Quick Quiz

Fill in the Blank:
Within five days, a list of all tenant security .

Under A.R.S. §32-2174 all property management accounts shall be designated as trust accounts and shall include descriptive wording, substantially similar to one of the following, in the trust account title:

  • “Trust account.”
  • “Fiduciary account.”
  • “In trust for (individual or entity name).”
  •  “Trustee for (individual or entity name).”
  • “Fiduciary for (individual or entity name).”

A broker’s trust account is required for all of the owner’s monies, except if the owner images-1directs the broker to deposit the monies directly into the owner’s account. The broker shall not have access to the owner’s account. Trust accounts may be interest bearing.

The designated broker for a property management firm may authorize either a licensee or an unlicensed natural person in the direct employ of the broker to transfer monies or to be a signatory on the property management firm’s trust accounts. If the person who is designated to sign on behalf of the designated property management broker is an unlicensed person, that person shall be a bona fide officer, member, principal or employee of the property management firm. The broker may require dual signatures on checks and may use a facsimile signature according to the broker’s business policies and procedures. The designation of a licensed or unlicensed person to transfer monies or to be a signatory on trust accounts does not lessen the broker’s responsibility or liability for any monies handled.

Within three banking days after receiving monies that are not subject to dispute or contingency, the property management firm shall deposit the monies in either the owner’s direct account or the property management firm’s trust account for the benefit of the owner. A property management firm may remit an owner’s monies under its control to or for the owner by any lawful means available.

Each rental agreement executed by a property manager shall include a provision that clearly states the disposition of any tenant deposits.

Quick Quiz

Fill in the Blank:
Each rental executed by a property manager shall include a provision that clearly states the disposition of any tenant .

Under A.R.S. §32-2175: Property management records; requirements; audits

  • Property management firms shall keep a residential rental agreement and related residential rental agreement documents for one year from the expiration of the rental agreement or until the rental agreement and related documents are given to the owner at the termination of any property  management agreement. The records shall be kept at the broker’s main office or at an off-site storage location in this state if the broker provides prior written notification of the street address of the off-site storage location to the department.
  • Property management firms shall keep records of all finder fees that are paid to tenants for three years after the payment is made or until the records are given to the owner at the termination of the property management agreement. Records shall be kept at the broker’s main office or an off-site storage location in this state if the broker provides prior written notification of the street address of the off-site storage location to the department.
  • Property management firms shall keep all financial records pertaining to clients for at least three years from the date each document was executed, including bank statements, canceled checks or bank generated check images, deposit slips, bank receipts, receipts and disbursement journals, owner statements, client ledgers and applicable bills, invoices and statements.
  • Only the designated broker or the broker’s authorized real estate licensee, on behalf of the broker, may sign nonresidential rental agreements. The broker shall execute in writing and shall file any delegation of authority in the broker’s employee file. Fully executed residential lease agreements are not required to be reviewed and initialed.
  • The property management firms shall consecutively number or file all signed property management agreements in compliance with a system that is orderly, easily accessible by the commissioner or the commissioner’s representative and consistent with generally accepted professional standards of the industry for that type of real estate.
  • Property management firms shall maintain each nonresidential real estate lease agreement and the transaction folder in which it is kept in a chronological log or another systematic manner that is easily accessible by the commissioner or the commissioner’s representatives. For nonresidential lease transactions, transaction folders shall contain:
  • Confirmation that the deposits or other monies that were handled by or through the broker were handled according to instructions given by or agreed on by the parties to the transaction.
  •  A complete copy of the nonresidential lease or rental agreement.
  • If applicable, a copy of the listing agreement.
  • Property management firms shall number on-site residential rental transaction folders according to dwelling unit number or another systematic manner that is easily accessible by the commissioner or the commissioner’s representative. A broker is not required to maintain duplicate residential rental transaction folders.
  • On request by the commissioner or the commissioner’s representatives for routine audit purposes, the broker shall make available within a reasonable amount of time all records relative to property management accounts, including lease agreements, lease related documents and trust account records.
Quick Quiz

Fill in the Blank:
Confirmation that the or other monies that were handled by or through the broker were handled according to instructions given by or agreed on by the parties to the .

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