TRUST accounts should be audited at least twice a year by independent auditors to ensure that all accounts are transparent, Knight Frank MD Lanice Steward said this week.
She said estate agency clients should be aware that all trust accounts have to be audited twice a year by independent auditors.
“Agency clients should insist on their trust money being in a dedicated account and not in a single account…Some accounts have been falsified, this could mean that reputable auditors were misled. The public should know, however, that such instances are very rare,” she said.
Trust funds are set up as legal entities for the benefit of a group or individual.
Trust funds are useful in estate planning because they can be used as vehicles to easily transfer one’s assets belonging to the deceased to beneficiaries.
Putting your assets in a trust fund can also protect the beneficiaries from costly estate taxes. Property analysts said money in trust fund might even be used to pay estate taxes.
“At Anne Porter Knight Frank ,we give our clients a unique login to their own trust fund account, which makes it possible for them to check that all their money is safe. This ensures that they can keep track of all sums lodged with, or withdrawn from, the account,” she said.
She said there was a sense of false security when a client automatically assumes that an attorney’s trust account will be 100% safe.
She said there were isolated cases where attorneys had on occasions swindled trust accounts.
“These cases have not had the same media attention but they have occurred. If you are giving your hard earned money to anybody check thoroughly how their trust accounts work and insist on having monthly statements,” Steward said.
Estate Agent of Zimbabwe secretary general Benias Gweme said “every individual should demand audits where they invest their money and ensure that all documents were authentic”.
“There should cross check operation of whoever they are dealing with to avoid regretting in future,” Gweme said.
Highrise Real Estate MD Munyaradzi Sagonda said trust fund audits where necessary and should be done annually to ensure that transparency and trust was maintained.
Meanwhile, property expert Michael Bauer said lease agreements were not standard and cost recovery arrangements by landlords varied from property to property.
“A key to a satisfactory landlord-tenant relationship is to define in the agreement upfront (before the lease is concluded) the direct and indirect operating costs of the property, stating clearly the costs for which the landlord and tenant are responsible,” he said.
Bauer said the landlord must ensure that the tenant initials the relevant clauses in the lease and understands his responsibilities.
Although, leases can be verbal, it is advisable for the landlord to have a written lease.
The Estate Agent of Zimbabwe says it makes this obligatory.
In most lease agreements, the direct costs charged to the tenant will include the water, sewerage, electricity and refuse collection charges.
“Landlords should insist that all municipal accounts are posted to themselves rather than the tenant. Tenants who in theory are paying these accounts to the municipalities without intervention from the landlord, in practice sometimes do not do so with the result that when the tenant leaves, the landlord ends up with unpaid municipal accounts dating back several months, or even years,” Bauer said.
For tenants who stay with the landlord it is advisable that the lodger is shown the bills instead of being asked to pay a certain amount of money without seeing the utility bills.
In one case in Mabelreign US$1 900 was outstanding on the electricity and US$1 440 owed on the water account when the tenant absconded from the property.
“Had the accounts been sent to the landlord for forwarding to the tenant, the defaults on payments would have been reflected on the monthly statements and would have been immediately picked up by the landlord,” said Bauer.
The indirect operating costs of a property include the building insurance, rates, taxes and levies. The landlord is not able to charge these to the tenant as they are for his account. In particular the rates payable at the time the tenant takes occupation will usually be paid by the owner.
He said annual increases in the insurance premium can be recovered from the tenant and can be high. For example, if a tenant is storing inflammable material in his garage, the insurance company must be notified by the owner and an additional insurance premium must be charged.
“In general the fewer extra charges passed on to the tenant, the better, but landlords must be guarded against those tenants who habitually use excessive amounts of water or electricity or who damage or neglect their properties,” he said.“If on the other hand, a landlord finds he has a good tenant it is worth his while to be as generous as possible in order to keep him,” Bauer said.