Trust Accounts, Owner Statements and 1099s: How a Manager Handles Your Money

Reviewed by Brendan McKee, Managing Broker, DRE #01882732, on October 21, 2026.

A licensed California property manager must put your rent and your tenants' deposits into a broker trust account within three business days, keep a separate ledger for you, reconcile the account at least monthly, and pay money out only as you direct. You should get regular statements showing rent collected, expenses paid with invoices, fees taken and money sent to you, plus a Form 1099-MISC each year for the rent paid over. These rules come from state law and Department of Real Estate (DRE) regulations, so they apply the same way in the City of San Diego, Chula Vista, the unincorporated County and the rest of California.

Key takeaways

• A broker who collects money for others must hold it in a trust account in a California bank, and must deposit it within three business days of receipt (Bus. & Prof. Code § 10145; 10 CCR § 2832).
• The broker keeps a record of all trust funds plus a separate ledger for each owner, reconciled at least once a month (10 CCR §§ 2831, 2831.1, 2831.2).
• Mixing your money with the broker's own is commingling, a ground for license discipline (Bus. & Prof. Code § 10176(e)).
• No statute requires monthly owner statements, but the DRE recommends a monthly accounting and a detailed annual statement.
• The manager reports rent paid over to you on Form 1099-MISC: the threshold is $600 for 2025 payments and $2,000 for 2026 payments.

How a trust account works

When a manager collects rent or a security deposit for you, the money is not the manager's. California law requires a broker who accepts funds belonging to others to deposit them, unless they go straight to you or a neutral escrow, into a trust fund account maintained by the broker in a bank or recognized depository in this state, and to keep them there until disbursed according to the instructions of the person entitled to them (Bus. & Prof. Code § 10145(a)(1)).

The deposit deadline is short: no later than three business days after the broker or its salesperson receives the funds (10 CCR § 2832). Only the broker (or, for a corporation, a licensed officer) may withdraw funds, or, with written authorization, a salesperson licensed to the broker, another broker under written agreement, or an unlicensed employee if the broker carries fidelity bond or insurance coverage at least equal to the most trust money that employee can access (§ 10145(a)(2)). Delegating that authority doesn't relieve the broker of responsibility.

Two more protections matter to owners:

• One owner's money can't cover another's. If a payment would drop the account below the total the broker owes all owners, the broker needs the written consent of every owner with funds in the account first (10 CCR § 2832.1).
• No kickbacks on the account. Any benefit the broker receives for where it places trust funds belongs to the client, and the broker can't accept an inducement for placing the account without the client's written permission (10 CCR § 2830).

Interest-bearing trust accounts are allowed only at the owner's request and under listed conditions, and the interest can't benefit the broker (§ 10145(d) to (e)).

Commingling and the broker's own money

A broker may not mix its own money with clients' money (Bus. & Prof. Code § 10176(e)). The regulation allows two narrow exceptions (10 CCR § 2835):

• up to $200 of the broker's own money in the trust account to cover bank charges; and
• a deposit that is partly the broker's, such as a management fee inside a rent payment, as long as the broker's share is withdrawn within 25 days and the owner doesn't dispute it. A disputed portion stays in the account until the dispute is settled.

The DRE's trust funds guide gives a common example of commingling: depositing rents and deposits from broker-owned properties into the clients' trust account. If a manager also owns rentals, ask how those funds are kept separate.

What the manager must record, and what you should see

The law sets the broker's internal records in detail:

What you receive is a different question. No statute or regulation we found requires a broker to send owners a monthly statement. The DRE recommends that a property manager provide "not only a monthly accounting to the property owner, but also a detailed annual statement," and its brochure for landlords says the contract should require monthly accounting reports. Put the reporting schedule in your property management agreement.

A useful monthly statement shows:

1. Rent charged and collected, unit by unit, with any late or unpaid amounts.
2. Each expense, with a copy of the invoice or a link to it.
3. Management and other fees, itemized.
4. Any reserve held for you and the security deposits held for your tenants.
5. The net amount sent to you, and the date.

The DRE's brochure also tells owners to be alert if the manager doesn't send copies of invoices, and to be wary if the manager doesn't disclose all income from managing your property, including ownership in maintenance or repair companies it uses. Secret or undisclosed compensation is a ground for discipline (Bus. & Prof. Code § 10176(g)). Markups aren't illegal by that rule; undisclosed ones are the problem, so ask.

Security deposits held by a manager

Your management agreement decides whether the manager holds the tenant's deposit or passes it to you. If the broker holds it, it belongs in the trust account like any other client funds. California treats the deposit as held for the tenant, and the tenant's claim to it comes before claims of the landlord's creditors (Civ. Code § 1950.5(d)).

The return rules are the same whoever holds it, statewide as of October 2026: an itemized statement and the balance within 21 calendar days of move-out, with photos and receipts, and electronic return if the tenant paid electronically (Civ. Code § 1950.5, AB 414). If you change managers, the deposit should move with the trust records, and the tenant should get updated owner and manager contact details within 15 days (Civ. Code § 1962).

1099s and taxes

The manager reports to the IRS the rent it paid over to you. Under the IRS instructions, "the real estate agent or property manager must use Form 1099-MISC to report the rent paid over to the property owner" (Box 1). The thresholds changed:

• 2025 payments (forms filed in early 2026): $600 or more.
• 2026 payments (forms filed in early 2027): $2,000 or more, adjusted for inflation after 2026.

Form 1099-MISC is due February 28 on paper or March 31 electronically. If a tenant has a housing voucher, the San Diego Housing Commission issues a Form 1099-MISC for its assistance payments each year. Whatever forms arrive, report all rental income on Schedule E; see Schedule E rental income and expenses.

If you live outside California, a manager paying you rent generally must withhold 7% for the Franchise Tax Board once payments exceed $1,500 in a calendar year, after deducting the management fee, and send you Form 592-B by January 31 (FTB Pub 1017, rev. 02/2026). See nonresident owner rent withholding.

Keep the statements. The IRS says to keep records that support income and deductions until the period of limitations for that return runs out, and property records until the limitations period for the year you dispose of the property.

How to check a manager's money handling

Before you sign, and once a year after:

• Look up the license on the DRE's public license lookup (opens in a new tab) and confirm it is active and matches the company.
• Ask where the trust account is held and who can sign on it.
• Ask how often owner ledgers are reconciled and whether you can see your ledger.
• Confirm every fee, markup and affiliated vendor is disclosed in writing.
• Compare each statement against the invoices, and ask about anything unexplained.
• Check whether your own insurance covers fraud by a property manager, as the DRE suggests.

This is general information, not legal or tax advice. Confirm the details for your situation with a California attorney or tax professional.

For the license rules behind all of this, see does a San Diego property manager need a license, the day-to-day in what a San Diego property manager does, and the overview of San Diego property management.

Frequently asked questions

How are rent and security deposits held by a property manager in California?

A licensed broker must deposit money collected for owners into a trust account at a bank or recognized depository in California within three business days of receipt, unless it goes directly to the owner or a neutral escrow (Bus. & Prof. Code § 10145; 10 CCR § 2832). The broker keeps a separate ledger for each owner, reconciles it at least monthly, and may not mix its own money with clients' funds beyond the narrow exceptions in 10 CCR § 2835.

Does a property manager have to send me a monthly statement?

No statute or DRE regulation we found requires monthly owner statements, but the DRE recommends a monthly accounting plus a detailed annual statement, and its landlord brochure says the contract should require monthly accounting reports. Write the schedule and contents into your management agreement, and expect invoices for expenses. Separately, the broker must reconcile its own trust records at least once a month (10 CCR § 2831.2).

Will my property manager send me a 1099?

Yes, if the rent paid over to you meets the IRS threshold. A property manager uses Form 1099-MISC, Box 1, to report rent paid to the owner. The threshold is $600 for payments made in 2025 and $2,000 for payments made in 2026, and the form is due February 28 on paper or March 31 if filed electronically.

Can my property manager keep the interest on my trust funds?

No. Under Business and Professions Code § 10145, a trust account earns interest only at the owner's request and under listed conditions, and the interest may not benefit the broker directly or indirectly. Any other benefit a broker receives for placing a trust account also belongs to the client unless the client agrees in writing (10 CCR § 2830).

What should I do if my statement doesn't add up?

Ask the manager for the invoices behind each charge and for your owner ledger, and compare them with the deposits you received. The DRE tells owners to review every accounting and to be alert if a manager won't provide invoices or disclose all income from managing the property. If the answers don't resolve it, you can contact the Department of Real Estate, which can audit a broker's trust records (Bus. & Prof. Code § 10148).

Next step: see how your rental would be managed

Clear money handling starts with clear numbers. McKee Properties has managed San Diego rentals since 1982, and its owners see statements through an online owner portal (AppFolio). Start with a free, no-obligation rental analysis: see what a free San Diego rental analysis covers.