“Trustee” is basically defined by the Black’s Law Dictionary as a term derived from Roman law meaning, as a noun, a person or legal entity, having the character of trustee, with respect to the trust and the trust involved as scrupulous good faith. and frankness towards other people’s affairs. A fiduciary also has duties that are described as having to do with good faith, trust, special trust, and openness toward the interests of others. 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, i.e., the manager, for other people must exercise a standard of care in which the interests of the owners of the money or property are above and beyond those of the manager of the property. property. In some states, such as California, for example, a property manager is defined by law as an individual or entity that has the same duties as a trustee, that is, a trustee.

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

Common Fiduciary Duties Owed by Property Managers

Because a property manager is a fiduciary, they must act in the highest good faith and fair dealing with respect to the owner’s asset, disclose all material information that may affect the owner’s decision-making with respect to that asset, and not Can in no way, 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 at times not to act in the best interest of their clients to satisfy their own convenience. As unfortunate as it sounds, it happens regularly.

The following is a short list of some common sense dos, dos and don’ts when there is a fiduciary relationship between a manager and an owner.

A manager must have a written agreement with his clients and may even have a legal right to benefit from the services he provides to the owner; however, a manager cannot secretly benefit from this relationship. For example, a manager may charge an eight percent surcharge 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 agrees with the marking. If this surcharge was not in the agreement, then the law requires the property manager to return or forfeit all secret benefits derived from the relationship. There are so many possible examples of this, but a common one is a manager who makes a percentage of profit on the work and services he provides to his clients but does not disclose; like a new roof, bathroom remodeling, interior wall repairs, etc.

A property manager is required to disclose any and all rental offers received along with documentation of those offers so that the owner is well informed of all potential tenants. It’s easy for a manager not to provide the names of prospective tenants who don’t necessarily qualify or are low credit risks, as this would put more work on the manager.

A property manager is legally bound to act in the sole interest of the asset owner in matters arising out of the relationship, whether those matters seem insignificant or are significant.

Information about a tenant who is delinquent in paying rent must be reported immediately to the owner of the asset. If your management company is using a software system that allows for an “Owner Portal” then this information is readily available to view and anytime you have internet access.

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

Trust Account Duties

A trust account that holds deposits and income for the benefit of the asset owner is a common reason for a breach of fiduciary duty. The law prohibits a trustee from commingling client trust funds with funds owned by the broker or trustee.

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

Surprisingly, another common example of mixed funds occurs when the property management fee is not timely withdrawn from the trust account. Sometimes a twenty-five (25) day delay may be considered to begin.

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

Trust fund mixing is a felony

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


Managers owe fiduciary duties to their clients: this is the minimum standard owed. There are many ways to breach these duties that form the basis of the manager-customer relationship. It is important to hire a property manager who understands and abides by the legal framework, fully understands what a fiduciary duty entails, and can clearly communicate those duties while fulfilling them. It is important that owners ensure that they hire property managers who meet these minimum standards.

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