This article is part of an ongoing series covering violations of real estate law. Here, a corporation deposited trust funds improperly and late — and was fined by the DRE.
In June 2018, TD Holdings I Inc. (TDHII), a San Diego-based real estate corporation, along with its broker officer Richard Joy, was subject to disciplinary action by the California Department of Real Estate (DRE) for violations of the real estate law regarding trust funds.
TDHII operates under several different “doing business as” names (DBAs) including:
- Keller Williams San Diego North inland;
- Betyar Real Estate Group; and
- North Inland Escrow.
According to DRE records, the corporation has held its license since 2009, and employs 221 sales agents and 20 broker associates at the time of this writing.
The DRE investigated a period of activity between 2013 and 2016, revealing a pattern of violations such as:
- trust fund shortages totaling approximately $670;
- inaccurate trust fund records, such as duplicate payments and unrecorded or inaccurate deposit dates;
- late trust fund deposits; and
- authorization of unlicensed employees to sign on a trust account without sufficient fidelity bond coverage.
As a result, TDHII agreed to pay a fine of $6,000, along with all costs associated with the DRE audits and subsequent investigation — a total penalty of $27,000.
First tuesday reached out to Keller Williams San Diego North Inland multiple times for comment, but did not receive a response.
The DRE has noted that trust fund shortages — in which a broker disburses funds from the account without the consent of the owner of the funds — are among the most common violations it encounters.
However, when dealing with trust fund accounts, violations like these are easy to avoid. Familiarize yourself with the rules, keep records carefully and, to avoid further violations, make sure funds are deposited properly and on time.
Brokers who accept trust funds are required, no later than three business days after receipt of the funds, to deposit those funds:
- into a neutral escrow depository;
- directly to the broker’s principal; or
- into a trust fund account the broker maintains.
In the case of TDHII, funds were typically deposited months after receipt, an unambiguous violation of California law.
Remember, adherence to real estate law only requires keeping abreast of relevant rules and regulations. For a complete overview of all DRE requirements and restrictions regarding trust funds, check out the DRE’s guide on the subject.
First tuesday also has a comprehensive breakdown of the basics here.
Learn how to avoid and prepare for DRE audits: