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"No Kids, No Heat, and Borrow From the Trust Account"

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"No Kids, No Heat, and Borrow From the Trust Account"

Ravi manages a 60-unit rental building for an out-of-province owner. The owner emails: "Stop showing to families with kids - the playground is a liability. Also skip the furnace repair in unit 12; the tenant paid late in March so let them sweat. And take $8,000 out of the trust account to cover the roof on my other property; I'll pay it back after the sale." The trust account currently holds $41,000 in tenant damage deposits and last month's rents. Ravi's broker just hired a new unlicensed assistant who has been signing lease renewals for Ravi while he is on site visits. The furnace has been out for nine days and the tenant has asthma.

1. How should Ravi respond to the screening and furnace instructions?

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He refuses both, in writing, and fixes the furnace now.

The screening instruction Refusing to show units to families with children is discrimination on the ground of family status under human rights legislation. "The playground is a liability" does not change that, and there is no adult-only workaround to rely on. Ravi should tell the owner in writing that he will continue to apply consistent, documented, objective screening criteria to every applicant, and that he cannot implement the instruction.

The furnace instruction Withholding a repair because rent was late is retaliation, and it is a maintenance failure. The landlord has an obligation to maintain the premises; a dispute about late rent belongs in the tenancy dispute process, not in the heating system. Nine days without heat in a unit occupied by an asthmatic tenant is urgent and creates real liability.

Sequence

  1. Arrange the repair immediately, treat it as an emergency, and charge it to the owner's operating funds.
  2. Put the refusal and the reasons in writing to the owner.
  3. Notify his broker.
  4. Document everything, including the dates and the tenant's complaints.

If the owner repeats the instructions, Ravi should be prepared to terminate the management agreement rather than comply. "The owner told me to" is not a defence available to a licensee.

2. Can Ravi use the trust account to cover the roof on the owner's other property?

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No - and this is the most serious item in the file.

The $41,000 is not the owner's money sitting in a convenient place. It is security deposits and rents held in trust for tenants and for the owner of this building. Using it for a different property is misappropriation, even with a promise of repayment and even if the sale is expected to close.

What Ravi should do

  • Refuse in writing, stating that the funds are trust money and cannot be applied to another property.
  • Reconcile the account immediately. The $41,000 balance must be matched line by line to each tenant's deposit and each rental period. If it is already short, restore the shortfall at once from brokerage or operating funds and document how it happened.
  • Report any shortfall or irregularity to the broker immediately. A trust shortage is a reportable matter and self-reporting early is far better than being found at audit.
  • Tell the owner the roof must be funded from the owner's own operating account or financing.

Related trap: even within the correct building, security deposits generally cannot be treated as rent or used for repairs while the tenancy continues. Check the residential tenancy legislation before touching a deposit for any purpose.

A manager who moves the money "temporarily" has committed the breach the moment the transfer clears, not when the repayment fails.

3. The unlicensed assistant has been signing lease renewals. What is wrong with that, and what should happen?

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Signing a lease renewal is dealing in property management, which requires a licence. The assistant may prepare the renewal form for a licensee's review, book appointments, deliver notices, and maintain files - but cannot execute the renewal, negotiate its terms, or advise a tenant about it.

Why it matters beyond the paperwork A renewal signed by an unlicensed person may be defective, which puts every affected tenancy in doubt and creates a records problem for the brokerage. It also means tenants have been dealing with someone who is not accountable to the regulator.

What Ravi and the broker must do

  1. Stop the practice immediately.
  2. Identify every renewal the assistant signed and have a licensee review each one and re-execute or confirm it properly.
  3. Notify the broker - this is a supervision failure, and the broker owns it as much as Ravi does.
  4. Train the assistant on the boundary between clerical and licensed activity, and document the training.
  5. Review whether any tenant relied on advice the assistant gave.

Ravi's exposure is real: delegating licensed work to an unlicensed person is his decision, and "I was on site visits" explains the gap but does not excuse it. The three problems in this file - discrimination, a trust breach, and unlicensed activity - all trace back to the same missing habit: getting instructions in writing, testing them against the rules, and escalating before acting.