A property manager in Montreal, Quebec, handling operations for a large commercial complex, needs to pay the annual property taxes totaling $120,000 on behalf of the owner. The property management agreement specifies that a reserve fund of $50,000 is maintained in the trust account for emergency repairs, and the remaining operating funds available in the trust account for this property are $100,000. Which of the following constitutes a permissible disbursement of trust funds?

Question: A property manager in Montreal, Quebec, handling operations for a large commercial complex, needs to pay the annual property taxes totaling $120,000 on behalf of the owner. The property management agreement specifies that a reserve fund of $50,000 is maintained in the trust account for emergency repairs, and the remaining operating funds available in the trust account for this property are $100,000. Which of the following constitutes a permissible disbursement of trust funds?

Answer options:

• Issue a cheque for $120,000 from the trust account because the property management agreement authorizes payments from trust. ✅ Issue a cheque for $100,000 from the trust account and request the remaining $20,000 from the owner directly.
• Transfer $70,000 from the reserve fund portion of the trust account to cover the deficit for the property taxes.
• The property manager cannot disburse more than the operating funds available for taxes without explicit, renewed owner authorization in writing for the specific amount, irrespective of the property management agreement's broad authorization.

Correct answer: Issue a cheque for $100,000 from the trust account and request the remaining $20,000 from the owner directly.

Explanation: A property manager can only disburse funds that are available in the respective operating portion of the trust account. Raiding reserve funds which are allocated for specific purposes, or disbursing more cash than is currently held in the operating funds for that property, is not permissible without specific conditions or additional funds from the owner.