INTRODUCTION
Real estate brokers and salespersons receive trust funds in the normal course of doing business. They receive
these funds on behalf of others, thereby creating a fiduciary responsibility to the funds’ owners. Brokers and
salespersons must handle, control and account for these trust funds according to established legal standards.
While compliance with these standards may not necessarily have a direct bearing on the financial success of a
real estate business, non-compliance can result in unfavorable business consequences. Improper handling of
trust funds is cause for revocation or suspension of a real estate license, not to mention the possibility of being
held financially liable for damages incurred by clients.
This chapter discusses the legal requirements for receiving and handling trust funds in real estate transactions as
set forth in the Real Estate Law and the Regulations of the Real Estate Commissioner. It describes the requisites
for maintaining a trust fund bank account and the precautions a licensee should take to ensure the integrity of the
account. It explains and illustrates the trust fund record keeping requirements under the Business and
Professions Code and the Commissioner’s Regulations.
The discussions and examples in this chapter involve real property sales and property management trust account
transactions. Other types of real estate activities involving trust funds, although subject to the same laws and
regulations, may also have to comply with additional legal and regulatory requirements. While these other types
of transactions may require records significantly different from those illustrated, the record keeping
fundamentals still apply.