Section 039-400-2 - Real Estate Trust Accounts1. Definition of "Earnest Money Deposit" As used in this Section, the term "earnest money deposit" includes earnest money deposits and all other money held by the real estate brokerage agency for clients or other persons for purposes related to a real estate brokerage transaction.
2. Various Forms of Real Estate Trust Accounts A real estate trust account shall be in the form of a checking or savings account and may accrue interest on an earnest money deposit provided that the accumulated interest is properly disbursed. If the parties to the transaction agree to place the earnest money deposit in something other than a real estate trust account, the real estate brokerage agency shall not hold the funds or act as trustee.
3. Opening a Real Estate Trust Account The real estate trust account checks and bank statements must contain the real estate brokerage agency's trade name as licensed by the commission and must be imprinted with the words "real estate trust account."
4. Making Earnest Money Deposits An earnest money deposit received by a designated broker, as trustee, shall be deposited within 5 business days of acceptance of the offer. Other earnest money deposits received by the trustee shall be deposited within 5 business days of the trustee's receipt of such earnest money deposits.
5. Restrictions on Earnest Money Deposits in Real Estate Trust Accounts A designated broker shall not commingle the earnest money deposit of buyers or sellers in a real estate transaction with:
A. Funds belonging to the real estate brokerage agency. This provision shall not be construed to limit deposits made by the real estate brokerage agency of an amount sufficient to maintain the account, but such amount shall not exceed $500; orB. Funds held for persons that do not involve the sale, purchase or exchange of real estate. An earnest money deposit shall not be utilized prior to a closing for selling or buying expenses such as a title fee, survey, etc., unless agreed to in writing by all parties in the transaction. There shall be a proper accounting for all monies held by the real estate brokerage agency and any remittance shall be made within a reasonable time, but not more than 30 days, after the conclusion of the transaction.
6. Maintaining Real Estate Trust Account Records The designated broker shall maintain records and supporting documents sufficient to verify the adequacy and proper use of the real estate trust account. The records and supporting documents shall be maintained for a period of at least 3 years after the date set forth in Section 7(G) of this chapter.
7. Information Included in Minimum Real Estate Trust Account Records Minimum real estate trust account records shall include a ledger or journal which records in chronological order all receipts and disbursements of funds in the real estate trust account and provides the following information:
A. The date the earnest money deposit is received by the real estate brokerage agency;B. The date the earnest money deposit is received by the banking institution;C. The purpose of the earnest money deposit and from whom received;D. The purpose of the withdrawal and to whom paid;E. The amount of the earnest money deposit;F. The current running balance of funds held by the real estate brokerage agency; andG. The closing date of a transaction, if any, or the date the earnest money deposit was disbursed.8. Real Estate Trust Account Supporting Documents Real estate trust account supporting documents shall include:
D. Closing statements, if available;F. Additional items necessary to verify and explain record entries.9. Disbursement of Undisputed Earnest Money Deposits Held in Trust Disbursement of an undisputed earnest money deposit may occur by one of the two following procedures:
A. Authorization, in writing, from the parties to a real estate brokerage transaction agreeing to the disbursement; orB. Authorization by the designated broker who, in reasonable reliance on the terms of the purchase and sale agreement or other written documents signed by both parties, determines the appropriate disbursement of the undisputed earnest money deposit. The designated broker may, at the designated broker's own discretion, make such disbursement to release the undisputed earnest money deposit no sooner than 5 business days after notifying both parties of the designated broker's proposed decision to release the undisputed earnest money deposit. The earnest money deposit shall not be disbursed under this Section if prior to disbursement the designated broker receives actual knowledge of a dispute as provided in Section 2(10) of this chapter.10. Disputed Earnest Money A. Any time that more than one party to a transaction makes demand on the earnest money deposit for which the real estate brokerage agency is acting as trustee, the designated broker shall: (1) Notify each party, in writing, of the demand of the other party; and(2) Keep all parties to the transaction informed of any actions by the designated broker regarding the disputed earnest money deposit, including retention of the earnest money deposit by the designated broker until receipt of written release from both parties agreeing to the disposition of the earnest money deposit or agreeing that the dispute has been properly resolved.B. After notice as provided in Section 2(10)(A)(1) of this chapter, the designated broker may reasonably rely on the terms of the purchase and sale agreement or other written documents signed by both parties to determine the disposition of the disputed earnest money deposit and may, at the designated broker's own discretion, make such disbursement no sooner than 5 business days after notifying both parties of the designated broker's proposed disbursement of the earnest money deposit. This discretionary disbursement by the designated broker is not a violation of license law, but may not relieve the designated broker of civil liability.C. The designated broker may hold the earnest money deposit until ordered by a court of proper jurisdiction or agreement of the parties to make a disbursement. The designated broker shall give all parties written notice of any decision to hold the earnest money deposit pending a court judgment or agreement of the parties for disbursement.D. Absent written authorization from the party to be charged, the designated broker is not entitled to withhold any portion of the earnest money deposit when a real estate transaction fails to close even if a commission is earned. The earnest money deposit must be disposed of as provided by Section 2(10) of this chapter.02-039 C.M.R. ch. 400, § 2