Texas Property Management Trust Account Rules: TREC §535.146 Explained

Where Texas Is Different

Unlike California's regulation-by-regulation scheme, Texas concentrates nearly all trust money rules for license holders into a single rule: TREC §535.146 ("Maintaining Trust Money"), backed by the Real Estate License Act. Security deposits are governed separately by Texas Property Code Chapter 92. The rule is short; the ways to violate it are not. Every requirement below is one TREC examiners actually check, with the failure pattern we see in real books.

Rule 1: Deposit by Close of the Second Business Day

TREC §535.146 requires trust money — rent, security deposits, application deposits — to be deposited into a properly designated trust or escrow account "not later than the close of business of the second working day" after receipt. That is tighter than California's three days and far tighter than what most onboarding checklists assume.

The audit failure is rarely a missing deposit; it is a recorded deposit that never reached the bank. The tenant ledger shows rent received, the owner ledger shows it credited, and the trust bank statement shows nothing — so the trust account is overdrawn relative to actual cash the moment you disburse to the owner. North Carolina's commission revoked a license over a single $2,000 rent check deposited into a personal account instead of trust; TREC's enforcement posture on the same facts is no gentler.

Rule 2: Your Own Money Leaves Within 30 Days

Texas permits broker funds in the trust account in one narrow situation: money the broker has acquired an interest in — earned fees, or rent from a broker-owned property that flows through the same account. §535.146 requires those funds to be removed within 30 days of the broker acquiring the interest. Past 30 days, it is commingling.

The software trap is the same one that produces California's 25-day violations: Buildium's "Pay Out Management Income Accounts" and AppFolio's fee withdrawal are manual steps. The system computes your management fee and parks it in trust indefinitely until someone moves it. A quarter of skipped sweeps and your trust balance is padded with thousands of dollars of your own earned income — which reads to an examiner as either commingling or, worse, a buffer hiding a shortage elsewhere.

Rule 3: Every Record Traceable to a Specific Property

§535.146 requires transactions to be recorded concurrently and traceable to a specific property. Two bookkeeping habits break this rule constantly:

• Lump-sum posting. Recording the day's receipts as one summary journal entry. The bank deposit matches the total, so bank-vs-books reconciliation passes — but no individual owner sub-ledger has any transaction detail. When an owner demands an accounting, or TREC asks for the itemized trust liability, there is no path from dollars to properties.
• Misposted vendor bills. A landscaping invoice covering five properties booked entirely to one, or a repair moved to a different property because the "right" one lacked funds that month. APM Help lists wrong-property vendor bills among the top three causes of negative owner balances; forum posts document the same charge appearing on two owners' statements at once. Each of these is a §535.146 traceability failure, and the aggregate books still balance — which is why three-way reconciliation at the sub-ledger level is the only check that catches them.

Rule 4: Sub-Ledgers Per Tenant and Per Property for Deposits

TREC enforcement guidance is explicit that security deposits held in trust require separate sub-ledger accounting by tenant and by property, and refunds must be attributed just as precisely. Booking a deposit against the wrong property fails reconciliation on two properties at once — the one that shows phantom liability and the one whose real liability is missing.

Rule 5: Funds Must Stay Available — and Stale Checks Are Your Problem

§535.146 requires trust money to remain available for disbursement at the "appropriate time." Two consequences follow:

• No disbursing against uncollected funds. Paying an owner before the tenant's payment clears means the disbursement is funded by other clients' pooled money. Georgia's commission found a broker who "improperly disbursed funds without sufficient deposits" — multiple ACH reversals later, the trust account was short and the finding was doubled: commingling plus improper disbursement. The mechanics are identical under Texas rules.
• Outstanding checks over 30 days must be re-evaluated. A refund or owner check that has not cleared in 30 days is an unresolved liability, not a rounding artifact. Stale checks are one of the classic reconciling items that quietly carry a shortage forward month after month.

Security Deposits: Property Code Chapter 92

Chapter 92 governs the landlord-tenant side, and property managers inherit its deadlines:

• Refund within 30 days of surrender (with a forwarding address), less an itemized list of lawful deductions.
• Bad-faith retention exposes the landlord to $100 plus three times the wrongfully withheld amount plus attorney's fees — and the burden of proving the deductions' reasonableness sits with the landlord.

The trust accounting failure that turns a civil dispute into a license matter is the deposit that was never properly held: paid into the operating account on move-in, spent, and "refunded" months later out of other tenants' money. The deposit register shows the liability; the trust bank never held the cash. Our audit checklist covers how examiners test exactly this with the deposit register vs. bank balance comparison.

Record Retention: Four Years

TREC requires license holders to retain trust money records — sub-ledgers, statements, reconciliations, disbursement documentation — for at least four years. As with every state we have researched, missing records are not a neutral gap: the examiner construes undocumented discrepancies against the license holder.

Texas Compliance Checklist

• [ ] All trust money deposited by close of the second business day after receipt
• [ ] Broker-interest funds (earned fees, own-property rent) removed within 30 days
• [ ] Every transaction posted individually and traceable to a specific property — no lump-sum entries
• [ ] Security deposit sub-ledgers maintained per tenant and per property
• [ ] No owner disbursements against uncleared tenant payments
• [ ] Outstanding checks older than 30 days investigated and resolved
• [ ] Deposit refunds within 30 days with itemized deductions
• [ ] Four years of trust records, retained past the end of each management agreement
• [ ] Monthly three-way reconciliation: bank balance = trust ledger = sum of all sub-ledgers

Buildium and AppFolio will happily record a §535.146 violation without flagging it — the deposit deadline, the 30-day sweep, and property-level traceability are all human disciplines the software assumes. Our Buildium and AppFolio bookkeeping services audit the gap between what your system shows and what your trust bank actually holds.

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