Property managers owe, at a minimum, fiduciary duties to their clients

“Trustee” is basically defined by Black’s Law Dictionary as a term derived from Roman law that means, as a noun, a person or legal entity, having the character of a trustee, with respect to trust and confidence that scrupulous imply good faith and frankness towards the affairs of others. A fiduciary also has duties that are described as involving good faith, trust, special trust, and openness toward another person’s interests. Typical fiduciary duties are imposed and include relationships such as executor, administrator, trustee, real estate agents, attorneys, and, of course, property managers. A person or company that manages money or property, that is, the administrator, for other people must exercise a standard of care in the sense that the interests of the money or the owners are placed above and beyond those of the administrator of the property. In some states, like California, for example, a property manager is legally defined as a person or entity that has the same obligations as a trustee, that is, a trustee.

The way I always explain it to clients, using my hands to demonstrate it, is that my interests end at the top of my head (one hand on the crown), but the client’s interest rises above and beyond. out of my head and take precedence. on mine (holding both hands above my head in an interlocked position). Most people understand the gesture and understand that as a property manager and attorney my interests are much lower than those of the clients in our relationship.

Common fiduciary duties of property managers

Since a property manager is a fiduciary, they must act in the highest good faith and fair treatment with respect to the owner’s asset, disclose all material information that may affect the owners’ decision-making regarding that asset, and it cannot in any case. manner, shape or form act adversely to the interests of the owner. This may sound easy, but situations arise that tempt even the best property managers not to act in the best interest of their clients to satisfy their own convenience. As unfortunate as it may sound, it happens regularly.

The following is a short list of some common sense duties, rights, and mistakes when a fiduciary relationship exists between a manager and an owner.

A manager must have a written agreement with their clients and may even have a legal right to benefit from the services they provide to the owner, however a manager cannot secretly benefit from this relationship. For example, a manager may charge an eight percent markup on materials and services provided by vendors to the owner’s property. This is legal and acceptable as long as the agreement between the parties is consistent with the marking. If this margin was not in the agreement, the law requires the property manager to return or forfeit any and all secret earnings derived from the relationship. There are many possible examples of this, but a common one is a manager making a profit percentage on work and services rendered to his clients but not disclosed; such as a new roof, bathroom remodel, interior wall repairs, etc.

A property manager is required to disclose each and every rental offer received along with documentation of those offers, so that the landlord is well informed about all potential tenants. It is easy for a manager not to provide the names of potential tenants who do not necessarily qualify or have low credit risk, as this would involve more work for the manager.

A property manager is required by law to act for the sole benefit of the asset owner in matters arising out of the relationship, whether those matters are seemingly insignificant or of significant importance.

Information about a tenant who is behind on rent should be reported immediately to the owner of the asset. If your management company is using a software system that enables an “Owner Portal” then this information is available to view and anytime one has access to the Internet.

If a manager receives information that a tenant has caused property damage, the landlord should be notified as soon as possible. It is easy for the manager not to reveal this information for fear of facing the disgruntled owner or simply not wanting to deal with the conflict associated with that situation.

Trust account duties

A trust account that holds deposits and rental money for the benefit of the asset owner is common ground for breaches of fiduciary obligations. The law prohibits a manager from mixing the client’s trust funds with funds owned by the broker or manager.

Additionally, it is a breach of fiduciary duty to make mortgage payments on property owned by the broker from a trust account, even if the broker promptly reimburses the account for payments. The legal prohibition on conducting personal business from trust accounts is strictly enforced.

Surprisingly, another common example of fund mixing occurs when the property management fee is not withdrawn from the trust account on time. Sometimes a twenty-five (25) day delay could be considered a mixed bag.

Trust funds must also be deposited promptly. Some states require deposits to be deposited no later than the next business day.

Trust Fund Mixing is a Serious Violation

Mixing trust and broker funds is such a serious crime that it can be grounds for revocation or suspension of a broker’s license in most states. Therefore, this single issue should be of utmost importance to a property manager and property management company.


Managers have fiduciary duties to their clients – this is the minimum standard to be owed. There are many ways to breach these duties that form the foundation of the manager-client relationship. It is important to hire a property manager who understands and adheres to the legal framework, fully understands what a fiduciary duty entails, and can clearly communicate those duties while also fulfilling them. It is important that homeowners ensure that they hire property managers who meet these minimum standards.

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