State Compliance
Colorado is one of the few states that requires two separate trust accounts by rule — and one of the few with an explicit deadline for handing funds to your successor. Both rules are missed constantly.
Updated 2026-08-05 · TrustRecon research team
Colorado property managers operate under the Real Estate Commission's rules in 4 CCR 725-1. Three provisions do most of the enforcement work: Rule 5.11 (separate trust accounts by fund type), Rule 5.14 (monthly three-way reconciliation), and the 60-day handover rule for terminated management agreements. Colorado's Division of Real Estate enforces them with real teeth: in May 2024 the Commission accepted the immediate license revocation of Aerowood Property Management LLC / Ellie Reimer (license FA.100038970) on three findings — trust/custodial account violations, commingling of other people's money, and recordkeeping failures. Division Director Marcia Waters' statement summarizes the state's position: "Brokers may not use these funds for any unapproved client expense."
This is Colorado's most distinctive requirement, and the one out-of-state operators miss first. Rule 5.11 requires property managers to maintain at least two separate trust accounts:
Depositing a security deposit into the rental receipts account is a per-se violation — no shortage required — because the two funds have different beneficiaries with competing claims. Most PMS defaults assume a single pooled trust account, so a Colorado-compliant setup requires deliberately configuring the second account in Buildium or AppFolio and mapping deposit transactions to it. The examiner's first test is exactly the one in our audit checklist: trace each deposit receipt to which bank account it actually landed in.
Colorado allows five business days to get client funds into trust — more generous than Washington's next-banking-day or Texas's second-day rules, but with the same failure mode: funds recorded in the ledger that never physically reached the bank. Until the money lands, it is uninsured and invisible to reconciliation, and any owner disbursement in the meantime is being funded by other clients' pooled money.
Every calendar month, three numbers must be pulled level: the adjusted trust bank balance, the trust ledger running balance, and the sum of every owner and tenant sub-ledger. Rule 5.14 sits alongside California's Reg. 2831.2 and Arizona's ARS 32-2151 in requiring this monthly, with a signed worksheet. The classic Colorado-relevant failure is the one the two-account structure is designed to surface: an owner's ledger driven negative by a disbursement their balance didn't cover, quietly funded by the pooled deposits of others. The bank never bounces anything — only the sub-ledger leg of the three-way check exposes it.
When a management agreement ends — owner leaves, portfolio sells, contract terminates — Colorado gives the outgoing manager 60 days to transfer deposits and client funds to the owner or successor manager. Day 61 begins a continuing violation, computed daily. One documented pattern: an outgoing PMC still holding $15,000 in deposits across 10 units on day 61, in ongoing violation with each passing day.
The forum record shows how this plays out for owners: portfolio sellers discovering the old manager never transferred one lease's deposit and shorted two others, leaving the owner to make the new manager whole out of pocket. And the NCREC audit of 360 Real Estate (March 2024) found the mirror image — negative deposit balances lingering in trust for properties the firm no longer managed. Offboarding is a reconciliation event: every departing property should leave with a documented, zero-balance handover.
Consistent with 4 CCR 725-1's general trust provisions:
If you manage Colorado properties on Buildium or AppFolio, the two-account structure and the 60-day handover are configuration and workflow disciplines the software won't enforce for you. Our free audit tests both — including the offboarding ledgers most firms have never reconciled — across your PMS, QuickBooks, and bank exports.
Upload three exports. Within 48 hours you get a discrepancy report with every finding tied to a record ID. Built from the same failure patterns state auditors look for.
For property management companies on Buildium or AppFolio. No call required.