California Real Estate Broker ExaminationAgencyMedium
A property manager, acting as an agent for a landlord, collects rent from tenants. The property manager places these rent payments into their personal bank account before transferring them to the landlord's account. This action is a direct violation of which fiduciary duty?
- AObedience
- BConfidentiality
- CAccounting
- DLoyalty
Show answer & explanationAnswer & explanation
Correct answer: C. Accounting
The duty of accounting requires an agent to safeguard and account for all money and property entrusted to them on behalf of the principal. Commingling, which is mixing a client's funds with the agent's personal funds, is a serious violation of this duty.
Why the other options are wrong
- A. Obedience is following instructions; commingling is a breach of trust regarding funds.
- B. Confidentiality protects private information, unrelated to handling of funds.
- D. Loyalty involves acting in the principal's best interest, but commingling directly violates accounting.
Duty of Accounting
A fiduciary duty requiring an agent to properly handle, safeguard, and account for all funds and property received on behalf of the principal, and to avoid commingling or conversion.
- Keep client funds separate from personal funds (no commingling)
- Provide accurate records of all transactions
- Deliver all funds and property to the principal promptly
- Avoid conversion (misappropriation of client funds)
Memory trick: Accountants count every penny, ensuring no funds go astray, for any.