Commingling
Commingling is mixing money that belongs to clients, such as collected rent and security deposits, with a property management company’s own operating funds. Most states prohibit it for licensed managers, and it is one of the most common findings in real estate audits. The standard safeguard is a dedicated trust account.
How commingling happens in practice
- Rent and company revenue deposited into the same account.
- Management fees left sitting in the trust account long after they are earned.
- Company expenses paid directly out of client funds.
- One undivided balance with no per-owner or per-property accounting behind it.
Avoiding it takes both structure and records: client money in its own account, fees moved out on a defined schedule, and a ledger that can show each owner’s balance at any moment. AXYS keeps per-owner and per-property balances on a double-entry ledger, so the trust balance is always explainable rather than a single undivided number. For a deeper walkthrough, see Commingling and trust accounting.
Trust accounting and commingling rules vary by state and license type, and some states set deadlines for moving earned fees out of trust. Confirm your state’s requirements with your regulator or counsel. This is general information, not legal advice.
Is commingling always illegal?
Rules depend on the state and whether the manager is licensed. Many states prohibit commingling client funds outright for licensed brokers and managers, and some treat leaving earned fees in trust too long as a violation. Confirm your state’s requirements.
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