Silverado Ranch Property Management

Silverado Ranch Property Management

Founded in 2010, Rice Real Estate is Las Vegas’ premier investment focused property management company. Our Silverado Ranch Property Management team has crafted a culture designed around modern technology, full transparency, and reliable communication for both Owners and Tenants. Our policies & procedures allow us to nurture resident relations to keep long-term Tenants.

Silverado Ranch Property Management Trust Accounts

In 1997, Amendments were added to the NRS 645 and NAC 645 relating to property management activity. According to NAC 645.655(8), a broker who is engaged in property management for one or more clients must maintain two (2) separate property management accounts distinct from any trust account that the broker may have for other real estate transactions. One trust account must be used solely for rental operating activities, and the other trust account must be used solely for security deposits.   

MANAGEMENT ACCOUNT RECORDS

Records for property management accounts must include at least the property management file containing the management agreement, tax reports, individual tenant/lease files, cash journal, the chronological record of money received and disbursed, an Owner’s Ledger, a Tenant’s Ledger, bank statements, and checks.

MANAGEMENT AGREEMENTS

 A written contract for services between the property owner and the managing broker is required. NRS.645.6056. The agreement must list the broker’s responsibility and authority, and contain at least the following items: 1. A description of the subject property and its type, including the number of units managed; 2. The broker’s duties to be itemized; e.g. collection of rents, holding of deposits, payment of mortgages, physical maintenance, etc.; 3. Broker’s compensation; 4. Accounting and reporting requirements; 5. Procedure for repair and payment of repair bills (both emergency and routine); 6. Effective dates of the agreement with a specific termination date, and if the agreement is subject to renewal, provisions clearly setting forth the circumstances under which the agreement may be renewed and the term of each such renewal; 7. A provision for the retention and disposition of deposits of the tenants of the property during the term of the agreement and, if the agreement is subject to renewal, during the term of each such renewal; 8. If the agreement is subject to cancellation by broker and/or client, with and/or without cause, provisions stating the circumstances under which the agreement may be cancelled; and 9. Names and signatures of the owner(s)/broker(s)/designated property manager(s).

 MANAGEMENT FILES

A complete filing system for property management must include the information and documentation of all transactions and business dealings of the manager, owner, vendor, and tenant. A very small property may require only one file, but larger properties will need several file folders to maintain this data. The file(s) must include at least the following: 1. Property management agreement; 2. Rental/Lease agreement; 3. Duties Owed; 4. Correspondence; 5. Invoices and receipts for repairs, purchases; 6. Monthly owner reports (see exhibit #5); and 7. Other documentation that supports the discharge of the broker’s obligation, such as insurance information, inspection reports, pictures, advertising, etc.

PERSONNEL AND INCOME TAX REPORTS

Property managers who collect more than $600 per year for a client must provide that client (unless a corporation) with an Internal Revenue Service (IRS) form 1099 by January 31st of the following year. Property managers who pay more than $600 per year for services for a client must provide the service provider (unless a corporation) with an IRS form 1099 by January 31st of the following year. Property managers have to send copies of form 1099 to the IRS by February 28th of that year. These forms are available from the IRS or any office supply store. Property managers should keep income and expense records of such detail that the property owner can rely upon those records when preparing income tax returns. It is recommended that the broker consult a tax accountant for competent tax advice.

INDIVIDUAL TENANT/LEASE FILES

It is recommended that each tenant’s records be maintained in a separate tenant/ lease file. This file should contain the rental agreement, correspondence, documentation of charges to the tenant, legal actions, etc. When the tenant vacates, the final security deposit reconciliation should be maintained in this file.

 MAINTENANCE OF RECORDS

The following regulation amplifies the record keeping requirement found at NAC 645.650, regarding property management records: NAC 645.806 Trust accounts: Annual accounting required; maintenance of records. (NRS 645.190 & NRS 645.6052) 1. On or before the date of expiration of his license as a real estate broker, a broker who engages in property management or who associates with a property manager who engages in property management shall provide to the division, on a form provided by the division, an annual accounting as required by subsection 5 of NRS 645.310 which shows an annual reconciliation of each trust account related to property management that he maintains. 2. The reconciliation required pursuant to subsection 1 must include the 30 days immediately preceding the expiration date of his license as a real estate broker. 3. A broker who engages in property management or who associates with a property manager who Trust fund Accounting and Record Keeping for Nevada Brokers Page 21 engages in property management shall maintain complete accounting records of each trust account related to property management that he maintains for at least five years after the last activity by the broker which involved the trust account. If the records are maintained by computer, the broker shall maintain an additional copy of the records on computer disc for at least five years after the last activity by the broker which involved the trust account. (Added to NAC by Real Estate Comm’n by R059-98, eff. 7-1-98; A by R092-00, 8-29-2000)

CASH JOURNAL

The Cash Journal provides a chronological record of all funds received and disbursed. For cash receipts it must include the date, the account, the name of the party paying the money, name of the principal, and property identification. Disbursement records must include the date, the amount, check number, the payee and property identification. The Cash Journal should keep a running balance and be reconciled with the bank statement each month. > OWNER’S LEDGER The Owner’s Ledger summarizes all property income and expenses for the property managed that are handled by the broker. Each property should have its own ledger and must identify the property or properties for each owner. This ledger should itemize the source of money received, such as rent or owner funds, the use of money that is disbursed, and the current balance for this owner. A broker must account to his/her client on a monthly basis for all money and this ledger may be used to provide that accounting (see exhibit #3). > TENANT’S LEDGER The Tenant’s Ledger must identify the tenant and the property. The purpose of the ledger is to record the amounts and dates of all charges and payments (i.e. rent, deposits, damage fee) from a tenant. This record should be maintained separately for each tenant (see exhibit #4).

 BANK STATEMENTS AND CHECKS

Bank statements need to be reconciled each month, along with determining the account trial balance or account liability. To determine the trust account liability, the account balances of each sub-ledger (Owner/Tenant’s Ledger) for the account should be listed. There should not be ledgers with negative balances, as this would indicate conversion of trust funds from one client’s account to another. The account liability, the reconciled check register, and the reconciled bank statement must all show the same balance. If these three balances do not agree, the broker must locate the error. Errors may be from mathematical inaccuracies, missing checks, items improperly posted, or commissions not withdrawn. Whatever the reason, the problem needs to be corrected before it compounds. If a staff person performs the account reconciliation, the broker must sign the trust account reconciliation form to document that he/she has reviewed the work. Every year a reconciliation of the property management trust account is due to the Division on a form provided by the Division. NAC 645.806 and NRS 645.310. The due date is on or before the broker’s license anniversary month. Example: Broker’s license renews on June 30th, therefore, annual trust account reconciliation is due every year on or before June 30th (see exhibit #9). Brokers who hold a Property Management Permit, but are not required to file a Trust Account Reconciliation Form 546 per NAC 645.655(8) because they do not manage properties, should file Form 546A, Affidavit in Lieu of Form 546, annually before the end of the anniversary month of their broker’s license. Brokers with a Property Management Permit are required to file either a Form 546 or Form 546A annually (see exhibit #10).

SECURITY AND OTHER TENANT DEPOSITS

Security deposits are most commonly held in trust by the broker. They must be kept in a separate security deposit trust account per NAC 645.655. A security deposit may also be held by the property owner. If the security deposit is transferred to the owner, the tenant and all parties to the transaction must be notified in writing of the transfer. Trust fund Accounting and Record Keeping for Nevada Brokers Page 23 Deposits may be made by the tenant for security, cleaning, damage, pets, etc. The deposit may be refundable or non-refundable as stated in Rental/Lease Agreement. When a deposit is received or disbursed it must be accounted for to the owner and tenant. A deposit must be listed on the Tenant’s Ledger and must be identified as to its purpose (i.e. security, damage). The rental or lease agreement should include a provision authorizing the broker holding the deposit to transfer the deposit to another owner or manager, or for refund to the tenant. In the event that a transfer or deposit to another owner or manager does occur, it is also recommended that the transfer be acknowledged in writing. In addition, the tenant must be notified of such transfer in writing. Like all trust funds, deposits must be made to the appropriate trust account by the next banking day after receipt, unless written agreement of all parties requires otherwise.

MANAGEMENT REFERRALS

When paying a property management referral to an outside brokerage, a check can be issued directly from the broker’s trust account (it does not have to flow through the broker’s operating account). The outside broker becomes, in essence, a vendor to the owner.

Accurate Accounting is Mandatory in Silverado Ranch Property Management

Proper accounting for trust funds and adequate record keeping are basic to the management of a brokerage office and the legal responsibility of the broker. This helps understand the statutory and regulatory requirements of Nevada’s license law for the handling of trust funds. Failure of a real estate broker to manage properly or account for “funds belonging to others” can result in license revocation whether that failure is one of ignorance or negligence, whether intentional or unintentional. A broker’s fiduciary responsibility makes the maintenance of adequate records necessary. The broker is personally responsible for the supervision and maintenance of the trust fund accounts and records. Neither delegation of duties, ignorance of daily brokerage or management activities, nor failure to establish internal control relieves the broker of the responsibility and potential liability that can result from a failure to account adequately for money or maintain records. Inadequate records or failure to maintain control of the trust funds can result in internal theft, commingling of funds, misuse of trust funds, litigation and/or disciplinary action. The use of an outside record keeping or accounting service does not eliminate the need for broker supervision or substitute for the broker’s fiduciary responsibility.

WHAT CONSTITUTES TRUST FUNDS? Provisions of Chapter 645 of Nevada Revised Statutes (NRS 645) and Chapter 645 of Nevada Administrative Code (NAC 645) set forth the responsibilities of real estate brokers with regard to record keeping and the handling of trust funds. Trust funds are money or things of value that are received by the broker or salesperson on behalf of a principal, or client, or other person in the performance of duties for which a real estate license is required, which are not the property of the broker but are being held for the benefit of others. Trust funds do not include money relating to any property in which the broker or his/her personnel have an ownership interest. No matter how small the percentage of ownership, the intermingling of these funds with those of clients would constitute commingling. A separate bank account, not a trust account, Page 2 may be established to hold funds for the broker/company owned properties.

WHO HOLDS TRUST FUNDS? A broker may hold money or things of value for the benefit of others for many reasons. For example, earnest money deposits are funds held pending consummation of a sale transaction. Funds are held as payment of final settlement costs. In the property management field, a broker may keep security and maintenance deposits on rental properties, may hold mortgage payments for a client/principal, or may hold rents collected but not yet disbursed to the property owner. The money or things of value may include a check written to a title company or a mortgage company, a personal note made payable to the seller, title to a motor vehicle, jewelry or other personal property. The handling and safe keeping of all of these must be accounted for in a broker’s internal records and to a broker’s principal.

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