A trust account is an account in which one party holds money belonging to others, kept separate from its own funds. In property, brokers, managers or service providers may hold client money — such as deposits or rent — in a trust account so it is protected and clearly identifiable.
Where you’ll see it
You’ll see trust accounts used where a third party handles other people’s money: a property manager holding tenant deposits or collected rent, or a service provider holding client funds pending a transaction.
Why it matters
Keeping client money in a separate trust account protects it from being mixed with, or used as, the holder’s own funds. It makes the money traceable and recoverable, reducing the risk to owners and tenants whose funds are being held.
What it is not
A trust account is not the holder’s own operating account — the whole point is separation. It is also not the same as a project escrow account, though both are mechanisms for safeguarding third-party money.
Example
A property manager places tenant deposits and collected rent in a trust account, keeping owners’ and tenants’ money separate from the firm’s own finances until it is due to be paid out.
Connected documents and parties
Management or service agreement, account records; holder (manager/agent), owners, tenants, bank.
Going deeper: related reading: escrow account.
Related Terms
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