What Are Trust Funds?
Definition and Purpose of Trust Funds in Condominium Management
Trust funds in condominium management are monies held on behalf of a condominium corporation that must be managed separately and in accordance with Alberta legislation. These funds are typically collected from unit owners and must be used for the specific purposes designated by the condominium board and governing regulations.
Common Uses of Trust Funds
Trust funds in a condominium corporation are commonly used for:
Operating funds: Used for day-to-day expenses, including property maintenance, utilities, and management fees.
Reserve funds: Dedicated to major repairs and replacements of common property components such as roofs, elevators, and mechanical systems.
Legal Responsibilities in Administering Trust Funds
Compliance with the Real Estate Act Rules and Condominium Property Act
Condominium managers who handle trust funds must comply with the Real Estate Act (REA) and the Condominium Property Act (CPA). Key requirements include:
Ensuring that trust money is deposited into a designated trust account.
Maintaining accurate financial records for all trust transactions.
Managing funds separately to prevent commingling of operating, reserve, and special assessment funds.
The Real Estate Act Rules states a brokerage that receives trust money shall deposit the trust money in a trust account at a bank, treasury branch, credit union or trust corporation in Alberta in the name of the brokerage.
Role of Condominium Managers and Brokerages
Brokerages and condominium managers that manage trust funds must be licensed and meet RECA (Real Estate Council of Alberta) trust account regulations.
Requirement for Separate Accounts for Different Types of Funds
According to the Condominium Property Act (CPA) a corporation shall establish and maintain a separate fund, to be known as the reserve fund, to be used for major repairs and replacement of property owned by the corporation. This means that reserve funds must be kept separate from operating funds, ensuring clear financial accountability.
Applying Best Practices for Trust Fund Administration
Importance of Transparency and Accountability
To maintain trust and ensure legal compliance, condominium managers must:
Provide regular financial reporting to the condominium board and owners.
Ensure full disclosure of trust fund transactions in accordance with the REA.
Maintain detailed records of all deposits, withdrawals, and fund allocations.
Handling Trust Fund Disbursements and Maintaining Proper Records
Disbursements from trust accounts must be properly documented and approved by the condominium board.
Receipts and invoices should be kept for all transactions.
Regular audits and reconciliations of trust accounts must be conducted to prevent discrepancies.
The Real Estate Act Rules requires that a brokerage shall keep complete and accurate financial records of all transactions involving trust money.
Ensuring Compliance with RECA Regulations
All condominium managers handling trust funds must be licensed through RECA.
Any mismanagement of trust funds can result in penalties, fines, or suspension of a manager’s license.
The condominium corporation must regularly review trust account statements to ensure compliance.
