Maple Leaf Property Managers Ltd., based in Halifax, Nova Scotia, manages a portfolio of 20 residential units. They collect monthly rent totaling $25,000. Their property management agreement states a 6% management fee on gross rents collected. What is the correct procedure for transferring their management fee from the trust account to their operating account?

Question: Maple Leaf Property Managers Ltd., based in Halifax, Nova Scotia, manages a portfolio of 20 residential units. They collect monthly rent totaling $25,000. Their property management agreement states a 6% management fee on gross rents collected. What is the correct procedure for transferring their management fee from the trust account to their operating account?

Answer options:

• Transfer $1,500 (6% of $25,000) from the trust account to the operating account upon collection of all rents, prior to reconciliation. ✅ Wait for the end of the month, ensure all rents are cleared, reconcile the trust account, and then transfer $1,500 to the operating account.
• Transfer $1,500 (6% of $25,000) from the trust account to the operating account only after all other property expenses for the month have been paid.
• Transfer the full $25,000 to the operating account, then pay themselves the $1,500 management fee and remit the remaining funds to the property owners.

Correct answer: Wait for the end of the month, ensure all rents are cleared, reconcile the trust account, and then transfer $1,500 to the operating account.

Explanation: Property management fees can only be transferred from a trust account to an operating account after the funds have cleared the bank, the trust account records have been reconciled, and the amount is accurately due to the property manager as per the management agreement, adhering to regulatory requirements regarding trust fund handling.