An agency that manages property holds money that is not its own. Rent collected belongs to the landlord until it is remitted. A security deposit belongs to the tenant until the tenancy ends and the deductions are agreed. Service charge collected belongs to the building.
A client account is where that money sits so that it can be shown to be somebody else's.
Why separation is the whole point
Money in a single account is money with no owner attached to it. The agency's own fee income, this month's collections and eleven tenants' deposits become one balance, and the only thing distinguishing them is the manager's intention.
That fails in three ordinary situations, none of which require anybody to be dishonest:
A bad month. Collections are down, the salary run is due, and the balance in the account is sufficient. Nothing is stolen, and the deposits are now funding payroll.
A dispute. A landlord asks what is held for them. The honest answer is "somewhere in this balance", which is not an answer.
An exit. The agency closes, is sold, or the principal dies. Where client money is mixed with the business's own, working out what belonged to whom is a forensic exercise conducted by people with competing claims.
What good separation looks like
- A separate bank account, named as a client account, not merely a second account the agency happens to use for this.
- No agency money in it, other than a small float to keep it open where the bank requires one.
- No client money outside it.
- A ledger showing the balance held for each beneficiary, which must reconcile to the bank balance. This is the part that matters: the account proves the total, the ledger proves whose it is.
- Deposits identifiable per tenancy, as a standing liability rather than as part of collections.
- Reconciled on a schedule, monthly at minimum, with the reconciliation kept.
The reconciliation that proves it
| Line | Amount | | --- | --- | | Bank balance, client account | 4,812,400 | | Deposits held, per tenancy ledger | 3,140,000 | | Collections not yet remitted | 1,486,000 | | Service charge float held | 180,000 | | Total owed to others | 4,806,000 | | Unexplained difference | 6,400 |
That KES 6,400 is the entire value of the exercise. It is small, it is almost certainly a timing difference or a bank charge, and it is findable today. A client account that has never been reconciled does not have a smaller difference. It has an unknown one.
What a landlord should ask
Before signing a management agreement:
- Is client money held in a separate account?
- Are deposits shown as a standing liability per tenancy?
- When was the client account last reconciled, and can I see the reconciliation?
- What happens to money held for me if the agency ceases trading?
An agency that answers those four cleanly is demonstrating something no brochure can.
What goes wrong
One account for everything. The default, and the origin of almost every agency failure that leaves landlords and tenants out of pocket.
Deposits treated as working capital. They are not income and they are not a float. They are somebody else's money with a date attached.
The account exists and is never reconciled. A separate account with no reconciliation proves only that a separate account exists.