Given the scale and complexity of property management, holding and reconciling client monies is likely to be an important part of your role – whether you are a strata manager or real estate agent. And that’s why those monies are held in trust accounts: a third party account that ensures the funds are used for their designated purpose.
But real estate trust accounts and strata trust accounts are managed a little differently. Here’s a quick guide to what’s involved.
Real estate trust accounts
Real estate agents typically operate two pooled trust accounts – one for property management and one for sales and settlement. The property management account collects and disburses rent payments, and pays outgoings on behalf of the landlord such as council rates, insurance or utilities. The sales account handles transaction deposits through to settlement.
Real estate trust accounts are held in the name of the corporation license, and include the words ‘trust account’ – such as XYZ Real Estate Pty Ltd Trust Account. They are subject to mandatory audits, and typically reconciled at least monthly.1
Strata trust accounts
Strata managers and real estate agencies tend to operate multiple individual trust accounts for strata plans, although they can also operate pooled accounts. Each strata plan is likely to have its own account, where levies are collected (typically quarterly) and building maintenance or capital works payments are made.
Strata trust accounts are held in the name of the Body Corporate or Owners Corporation, or the Agency or Strata Management Firm if pooled. Depending on state requirements, they may not include the words ‘trust account’. For example, XYZ Strata Pty Ltd ITF: Strata Plan 123456. Western Australia does require ‘trust account’ to be in the strata trust account’s name. Reconciliation and audit requirements also vary according to state legislation.
Streamlining strata trust account management
“Trust accounting is a major challenge for strata managers, reconciling all the different payments,” says Trevor Yiu, Macquarie Bank Product Specialist, Regulated Trusts. “That’s why we have DEFT, and why we put a lot of effort into making sure we integrate with as many appropriate client software platforms as possible. We want to make their life easier.”
Macquarie Bank manages a significant proportion of Australia’s strata managers’ business banking, and Trevor says the DEFT payment system is a big attraction. “Levies can be collected online, with automated receipting and reconciliation,” he says.
According to the 2019 Strata Benchmarking survey, firms manage 262 plans on average.2 And that could mean 262 different strata trust accounts. The survey also identified a correlation between staff stability (lower staff turnover), and greater investment in technology to make operations more efficient.
“We make it simpler to manage trust accounts,” explains Trevor. “You can set accounts up online, and view multiple accounts through our online banking portal. The accounts integrate with major strata business management software, as well as PEXA.3 And you can set up different levels of access within the business as well, to provide greater assurance and accountability.”
The PEXA integration makes real estate trust management even easier, with the ability to distribute settlement funds online in a fraction of the time.
The requirements for strata trust accounts do vary according to state legislation. For example, from 1 May 2020 some strata schemes in WA need a 10-year maintenance plan – and a reserve fund to manage that plan’s implementation.4
With the ability to make ad hoc payments, have full transaction visibility, and streamlined reconciliation, Macquarie Bank’s trust accounts are designed to manage these different requirements. And its suite of specialist property solutions, such as Strata Improvement Loans, can also help you enhance and protect the value of your properties under management.
To learn more about Macquarie Bank’s specialist strata banking solutions, speak with your Relationship Manager, or call 1800 442 370.