ATTENTION:
Clients & Friends in Property Management,

This applies to every landlord, whether acting as a licensed property manager or managing your own property.  There will be hundreds of questions during the next several months.  It will necessarily involve a lot of guesswork as to specific details which are not addressed in the new law.  Please be patient as we try to navigate this new law and make practical sense of it.  SB 608 will be discussed in our Property Management Seminar on April 19, 2019.

Click on the link below to read a helpful announcement made by Multifamily NW.  

www.multifamilynw.org/news/governor-brown-signs-sb-608-into-law-thursday-feb-28th

       Recently, the word on the street has it that anyone operating a real estate brokerage or property management business in the State of Oregon must be organized as an entity registered with the Secretary of State, Corporation Division.  Entities include corporations, sub-chapter S corporations, limited liability companies, general partnerships, limited liability partnerships and limited partnerships.
 
         The point of this gossip was that you may no longer operate your business as a sole proprietorship.  That is wrong.  You may operate as a sole proprietorship.
 
       We don’t know where this started.  Makes no difference.  There is no legal requirement established by the Real Estate Agency that you change from a sole proprietorship to any of the entities named above.  You may continue as a sole proprietorship or initially organize as such.
 
         On the other hand, do not misconstrue this as advice that you should organize as a sole proprietorship.  There are many reasons for organizing an entity such as liability protection, possible advantageous tax effects and continuity in case of incapacity.
 
         Be sure to discuss how you may benefit from using an entity with your attorney and CPA.  The benefits are likely to be significant, so have that discussion now.

 REAL ESTATE AGENCY PLANS TO TOUGHEN 
ENFORCEMENT OF CLIENTS’ TRUST ACCOUNTING RULES

The February 2018, issue of the Oregon Real Estate News Journal includes an excellent article on compliance with Oregon Administrative Rules concerning clients’ trust accounts and clients’ trust accounts - security deposits.  Reprimands, suspensions and revocations, may become more common in the future, as the OREA emphasizes adhering to the rules regarding clients’ trust accounts.

1.     Report the opening of any clients’ trust accounts (“CTAs”) and clients’ trust accounts - security deposit (“SDA”) within ten days and have YOUR bank sign the “Notice of Client’s Trust Account”, available on the OREA website.  Note:  There is now only one form for both accounts.
 
2.     Prepare a 3-way reconciliation for each clients’ trust account every month and retain supporting documentation. An easy to use reconciliation form is provided on the OREA website.  The form is not mandatory but why invent your own when a better one is readily available?  Use the Agency form.  It walks you through the process.
 
3.     Never disburse payments from a CTA to anyone if there are insufficient funds to cover those payments at the time a payment is entered on the check register or receipts and disbursements journal.  Do not assume you can beat the check to the bank.
 
4.     Be sure the CTA has a positive ledger balance and bank balance at the time you enter a payment.
 
5.     Deposit all checks including only security deposits into the SDA within five days of receipt.  The security deposit portion of checks that includes both security deposits and rents must be deposited into the SDA within three days of deposit in to the clients’ trust account.
 
6.     Do not commingle your personal funds, from your personal rentals or any other personal source, in a CTA or SDA used for properties you are managing for other people.
 
7.     Report the closing of any CTA or SDA to the OREA, using your eLicense account within ten days.
 
8.     Keep all records of accounts for at least six years from the date you close your file. 

The OREA has been extremely generous with its practice instructional assistance and lenient sanctions in conjunction with its clients’ trust account audits.  If you hold a real estate license and engage in property management, you know that clients’ trust accounts are required.  If you know that much, learn how to comply with the rules for trust accounting.  Start by reading the rules in Oregon Administrative Rules 863-025-0025.   If you employ someone to help you with your bookkeeping, be sure they know what is required by the rules.  Simply hiring a bookkeeper, without expertise in property management rules, is a sure way to make mistakes.  Remember, you cannot blame anyone else if your company does not fully comply with the rules.  It is you alone that will be disciplined if there are mistakes.   ​