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Brokerage Standards Manual

VI. Managing Broker Duties

Accounts And Records

Section 3-1 of the Rules provides that the managing broker is responsible to ensure that the trust accounts and records of the brokerage are maintained in accordance with RESA, the Regulation, Rules and Bylaws and that there is appropriate management and control of documents related to the licensing requirements.

A managing broker must be a signing authority on each trust account maintained by the brokerage. Additionally, a managing broker, or someone designated by the managing broker, must review, date, and initial the monthly trust asset and liability reconciliations.

The Council would expect to find that the managing broker has reviewed and ensured the following is in place in the books and records of the brokerage:

  • a paper trail system implemented, with every trade in real estate, rental property management, and strata management file being reviewed by the managing broker, including deposits, expenditures, trade record sheets, service agreements and sales contracts, and any correspondence on the brokerage’s letterhead;
  • rental property management files containing copies of tenancy agreements, financial statements sent to owners, accounting statements and invoices for expenditures that are provided to the client, written service agreements, and a record of all security, pet and other deposits paid by each tenant;
  • strata management files containing copies of the written service agreement, financial statements, accounting statements and invoices for expenditures, and monthly statements from financial institutions sent to the strata corporation;
  • the monthly trust asset and liability reconciliation for each trust account reviewed and initialed by the managing broker or someone designated by the managing broker;
  • monthly trust liability reconciliations are maintained listing every client or trade for which the brokerage holds trust funds, and the amount of funds being held for each client;
  • trust bank statements, cancelled cheques and deposit books properly designated as “trust”;
  • trust journal and ledger for each trust account;

The managing broker should also ensure that all accounting records are kept up-to-date, the managing broker is a required signatory on all trust accounts, and the Accountant’s Report and Brokerage Activity Report are completed and filed with the Real Estate Council by their due date.

The Council recommends that when a managing broker transfers to a new brokerage, the managing broker reviews the brokerage’s books and records for previous years to ensure that the brokerage has been in compliance with the requirements of RESA and the Council guidelines.

Establishing and maintaining the foregoing policies and procedures will assist managing brokers in meeting their obligations to be in active charge of the business of the brokerage.

(a) Record Keeping in Strata Management Brokerages

Managing brokers are responsible for ensuring that the trust accounts and records of the brokerage are maintained in accordance with RESA, the Regulation, Rules, and Bylaws, and that there is appropriate management and control of documents related to the licensing requirements (see section 3-1 of the Rules).

A managing broker must be a signing authority on each trust account maintained by the brokerage. Additionally, a managing broker, or someone designated by the managing broker, must review, date, and initial the monthly trust asset and liability reconciliations.

accounts_recrodsIn order to meet their obligation to be in active charge of the business of the brokerage, managing brokers should establish and maintain the following policies and procedures:

  1. Establish a paper trail system so that every strata management file (including deposits, expenditures, service agreements and any correspondence on the brokerage’s letterhead) can be easily reviewed by the managing broker or a designate;
  2. Ensure that strata management files contain copies of
    • the written service agreement
    • financial statements
    • accounting statements and invoices for expenditures, and
    • monthly statements from financial institutions sent to the strata corporation;
  3. Regularly review the expenses from contingency reserve fund (CRF) and special levy (SL) trust accounts, particularly if the managing broker has delegated the authority for withdrawals from these accounts.
  4. Ensure that the brokerage has obtained the authority from the client to move or expend funds from the operating, CRF and SL trust accounts.
  5. Review and initial the monthly trust asset and liability reconciliation for each trust account (this must be done by the managing broker or someone designated by the managing broker).
  6. Maintain monthly trust liability reconciliations listing every client for which the brokerage holds trust funds, and the amount of funds being held for each client;
  7. Ensure that trust bank statements, cancelled cheques, and deposit books are properly designated as “trust.”
  8. Ensure that all funds held as “trust funds” are maintained in interest bearing trust accounts with one or more saving institutions in British Columbia.
  9. Establish and maintain a trust journal and ledger for each trust account.
  10. Ensure that the brokerage prepares and retains monthly bank reconciliations for all strata corporation trust accounts, no later than 5 weeks after the end of the month being reconciled (section 8-2 of the Rules). The brokerage must then provide that reconciliation along with the monthly bank statement and any other financial documents requested by the client (section 7-9(7)(b) of the Rules), no later than 6 weeks after the end of the month for which a statement was issued.
  11. Two signatures are required to authorize a withdrawal from a CRF or SL trust account; but a managing broker may delegate this authority pursuant to section 7-9(6) of the Rules to another licensee, a director or an officer of the brokerage, or to another person employed or engaged by the brokerage who is authorized to practice as a lawyer, a certified general accountant, a chartered accountant or a certified management accountant.
  12. Keep all accounting records up-todate. The managing broker must be a signatory on all trust accounts. 13. Complete and file the Accountant’s Report (or Trust Account Declaration) and Brokerage Activity Report with the Council by their due date.
  13. The Council recommends that, when a managing broker transfers to a new brokerage, they review the brokerage’s books and records for previous years to ensure that the brokerage has complied with the requirements of RESA and the Council guidelines.

Practice Tip: To ensure that authority to move or expend funds from the CRF or SL trust accounts has been received, create a brokerage form that identifies the amount, the account, and the reason for the expense. Have the client either sign the form, or have the brokerage attach the written authorization. Keep the completed form with the financial records for the transaction.

Practice Tip: Review the brokerage’s policy on providing financial statements to clients to ensure that it is done in a timely way. Sometimes, a brokerage may provide the “financials” to their client at the strata council meeting. Where a strata council has meetings less than once a month, a brokerage may inadvertently contravene section 7-9(7)(b) of the Rules.

Practice Tip: Managing brokers should review samples of the strata corporation financial statements provided to the client to ensure that they comply with section 7-9(7) of the Rules. The statements must include copies of bank statements, monthly bank reconciliations, and (if requested), copies of all other banking records relating to the account transactions, including cancelled cheques, other source documents, and records of receipts and disbursements.

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