@Alexis Schreier
No. Just, no. Former business banker here.
If this came across my desk from one of my clients I would have rejected it without a letter of clarification from both parties as to why this was necessary and why traditional alternatives were not acceptable.
And I still would’ve asked the bank’s litigation risk dept. to sign off on it before updating sig cards to protect myself.
You need to understand that adding a party as a signer to an account adds a tunnel to the account for any other party coming along later. That means that your account and the funds therein become targets if somebody goes after the PM company.
Some will tell you that’s not true. They’ll say simple signing authority doesn’t increase exposure - that only account ownership does. My practical experience tells me otherwise. All it takes is for the bank to receive a subpoena for a list of all lines business pertaining to or accessible by the PM firm and your account can be named as part of a case. A claimant may not prevail, but who wants their funds locked down pending a ruling?
Even if your PM is 100% honest and forthright, they still can’t guarantee somebody doesn’t come after them. And let’s be frank, you can never guarantee that even a forthright PM won’t find itself in a jam and act stupid with your money.
If you want proof of this, invert it. Ask the PM to put you on their corporate operating account as an authorized signer, you know, to streamline transactions and increase efficiencies and all that. See what they say.
Or try to sell your tenants on the idea. Tell them you need to be added to their checking accounts as a signer so you can just withdraw the rent each month to save time. I think they’d see this as a risk and tell you no thank you, just do an auto-debit instead.
There are PMs that operate this way- but it’s a no go for me. Especially since there are many safer alternatives. PMs should have escrow accounts for contributions from and distributions to you. Use those accounts or use your own escrow service for draws on or for exceptionally large amounts.
Hope this helps.
