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Professional Standards Manual

Strata Management Services

2. Practice Standards

(aa) Scope of Authority for Expenditures on Behalf of Strata Corporations

Section 30(1)(g) of RESA (see below) allows a brokerage, based on a strata corporation client’s instructions, to withdraw funds from a trust account maintained on behalf of that strata corporation.

Sec. 30. Withdrawals from trust account

(1) Money in a brokerage trust account, other than money that the brokerage holds as stakeholder, may be withdrawn only if it is one or more of the following:

(a) money paid into the trust account by mistake;

(b) interest paid in accordance with section 29 [interest on trust account];

(c) money authorized to be withdrawn under section 31 [payment of licensee remuneration];

(d) unclaimed money transferred under section 32 [unclaimed money held in trust];

(e) money paid into court under section 33 [payment of trust funds into court];

(f) money paid in accordance with a court order;

(g) money paid to or in accordance with the instructions of the principal to whose credit the money was deposited.

In conjunction with the above, the Rules require that: (1) a brokerage providing strata management services must establish in its service agreement the brokerage’s scope of authority to sign cheques and make disbursements on behalf of its strata corporation clients [section 5-1(5.1)(c)(i)]; and (2) the service agreement include a brokerage’s authority to transfer amounts between brokerage trust accounts maintained for the strata corporation under section 7-9(2) of the Rules [section 5-1(5.1)(b)(i)]; Therefore, the Real Estate Council, when investigating complaints or conducting an audit regarding a brokerage, will look at service agreements to determine a brokerage’s scope of authority relative to withdrawal of funds from trust accounts. An example is where a strata corporation has cash flow problems in its operating fund and requires a ‘‘loan’’ from the Contingency Reserve Fund (CRF). The strata manager would act outside of his/her scope of authority to unilaterally transfer such funds from CRF to operating in the absence of express authorization to do so.

If authority to make such transfers has not been established in the service agreement, a strata manager may incur substantial risk and liability, as well as be subject to discipline under the Rules. A brokerage should ensure that any parameters respecting its scope of authority to act on behalf of a strata corporation are clearly established in its service agreement with that client.