These regulations define a real estate broker’s proper handling of trust funds for his client
DRE Regulation Article 15 Section 2830
Effective: October 26, 2011
An agency relationship exists between a real estate broker and a client for whom the broker holds trust funds. In this relationship, the broker owes a fiduciary duty to the client. A benefit the broker receives related to the handling of a client’s trust funds belongs to the client and must be passed to the client.
Without possession of written permission from the client, it is unlawful for a real estate broker or corporate broker to directly or indirectly receive personal or professional fees, compensation or consideration from a person or institution other than the client as inducement for trust fund account placement.
Without possession of written permission from the client, the following activities performed directly or indirectly by a person are considered inducements for trust fund account placement and are unlawful:
- receiving or requesting payment for, provision of or assistance with business expenses, including but not limited to rent, employee salaries, furniture, copiers, facsimile machines, automobiles, telephone service or equipment or computers;
- receiving or requesting consideration intended for the benefit of the broker rather than the trust account, including cash, below market rate loans, automobile charges, merchandise or merchandise credits;
- receiving or requesting to receive on behalf of the broker or corporation, compensating balances or benefits in the pricing or fees for the maintenance of a compensating balance account (a “compensating balance” is defined as the balance maintained in a checking account or other account in a bank or recognized depository in the name of a real estate broker for the purpose of paying bank fees on a separate trust fund account);
- receiving or requesting all or any part of the time or effort of an employee of the bank or other recognized depository for a service unrelated to the trust account; and
- receiving or requesting expenditures for food, beverages and entertainment.
Receipt or request of the following does not violate law:
- promotional items with a permanently affixed company logo of the bank or recognized depository with a value of $10 or less for each item (items exclude gift certificates, gift cards or other items with a specific monetary value on its face, or that may be exchanged for any other item having a specific monetary value); and
- education or educational materials related to the business of trust fund management provided continuing education credits are not given.
It is presumed unlawful to receive or request any form of consideration as an inducement for the placement of a trust account if the consideration is not specifically set forth in this section.