Trust accounts are the backbone to a company that transacts with other people’s funds. In Zimbabwe the running of a Trust Account is governed by the law under Section 50 of the Estate Agents Act (27:07). If your funds are mismanaged or abused in anyway you have the right to report the matter to the Police and the Estate Agents Council of Zimbabwe.
A Trust Account is basically a bank account that is used to receive and pay for transactions such as taxes, insurances or even minor repairs for a property in a client’s name. As an investor or a property owner, if you wish to employ an agency to manage your property, the agency signs up a contract with you and is now made liable for the amount that is received by them. The funds received by the agency is held under trust and according to law, can only be used once approval is given by the property owner. Agencies that misuse trust funds can face major audit consequences and therefore it is important to understand the legal guidelines in respect to trust accounts.
As an agency, a contract is normally drawn up on behalf of the property owner between “the property owner-(landlord) and the tenant.” This becomes a legal binding document and therefore the funds received on their behalf should be handled according to trust fund accounting standards. The management company or the agency, takes this function upon themselves and are fully responsible and accountable for your funds.
The managing company needs to set up a separate bank account to its company account. This account is used at the “operations” account into which rentals and sale proceeds are deposited, payments and distributions are made from and funds are held for future use. The individuals taking care of the Trust Accounts for a company needs to notify the Estate Agents Council on his or her appointment.
Any monies received by an agent needs to ensure a deposit is made into the Trust’s bank account within six days of receiving them.
The individual appointed to take care of the accounts has to keep proper records with particulars and information on monies received and any monies being paid on behalf of the owner. Auditors can query a payment made from the landlord’s funds, and each payment should have a source document to prove it was for a valid property expense.
Accounting for trust can be complicated, but once the concept is adopted it can be very simple to ensure the accounting is being done well. A simple way to tell your accounts are in order is to make sure each month the monies received for landlords in your books matches the monies in the bank statement. At any given point, the bank statement and the landlord ledger always have to be equal.
In accordance to the Public Accountants and Auditors Act, the trust accounts have to be audited every once a year by a registered Auditor. The Auditor then submits his findings to the Estate Agents Council, only after which the council issues a renewed CompensationFund Certificate for the Agency. The Estate Agents Council also has a right to appoint their own registered auditor to inspect the books of accounts of any person practicing as an Estate Agent in order to ascertain that the rules and regulations are being observed at their own cost.
The rules governing trust accounts are very stringent and therefore a registered agent will by all means try and keep his records upto date and clean to avoid adverse consequences by the council. Therefore, property owners, hand over the stress of managing / selling your property to a registered Estate Agent- without any fear or stress as you are covered by the law!