QUESTIONS AND ANSWERS REGARDING TRUST FUND REQUIREMENTS AND RECORD KEEPING
Q. Are security deposits on rental units the property of the owner or should they be held in trust by the broker
for the tenant?
A. They are trust funds. As such, control and disbursement of the security deposits are at the instruction of the
property owner.
Q. Am I permitted to wait until checks deposited to my trust account have cleared before I issue a trust check
to fund a customer’s check?
A. Although the Real Estate Law is silent on this, good business practice dictates that you wait until a
customer’s check deposited to your trust account has cleared prior to the issuing of your trust check as a
refund.
Q. How should I handle an earnest money check which is to be deposited into escrow upon acceptance of the
offer?
A. Such a check may be held until the offer is accepted and then placed in escrow but only when directed to
do so by the buyer, provided you disclose to the seller the fact the check is being held in uncashed form. In
such cases, it is good practice to include such a provision in the deposit receipt. You must keep a columnar
record of the receipt of the check, the name of the escrow company and the date the check was forwarded
to the escrow.
Q. As a broker-owner of rentals, do I have to put security deposits in a trust account?
A. Money you receive on your own property is received as a principal, not as an agent. As such, these are not
trust funds and should not be placed in the trust account.
Q. Must I keep a deposit receipt signed only by the buyer and rejected by the seller?
A. Yes. Such a record must be maintained for three years.
Q. May I maintain one trust fund account for both collections from my property management business and
deposits on real estate sales transactions?
A. Since property management funds usually involve multiple receipt of funds and several monthly
disbursements, it is suggested that separate trust fund accounts be maintained for property management
funds and earnest money deposits. However, all trust funds can be placed in the same trust fund account as
long as separate records for each trust fund deposit and disbursement are maintained properly and the
account is not an interest-bearing account.
Q. If the buyer and seller decide to go directly to escrow and the buyer makes out a check to the escrow
company and hands it directly to the escrow clerk, do I have to maintain any records of this check?
A. No. You must maintain records only of trust funds which pass through your hands for the benefit of a third
party.
Q. How long must I keep deposit receipts?
A. Deposit receipts must be maintained for three years.