N.M. Admin. Code § 16.61.23.11

Current through Register Vol. 35, No. 20, October 22, 2024

Section 16.61.23.11 - DEPOSITS, DISBURSEMENTS AND COMMINGLING

A. Deposits. All trust account deposits shall conform to the following requirements.

(1) Timeliness. All funds of others pertaining to a real estate transaction shall be deposited into the proper trust or custodial account per written agreement of the parties to the transaction.

(2) Receipt records. A detailed record of all funds received shall be maintained by the qualifying broker and shall clearly indicate the following:

(a) date received;

(b) date deposited;

(c) from whom received;

(d) amount of deposit;

(e) property address or legal description including unit number (if unit number is applicable); and

(f) category or purpose of receipt (e.g., earnest money, rent, security deposit, funds from owner, etc.).

(3) Wrongful deposits. The following actions involving any trust account shall be improper and shall constitute commingling:

(a) depositing a broker's own funds into a trust or custodial account without disclosure to the owner of a managed property and the real estate commission;

(b) depositing funds in a trust or custodial account that are not directly related to a real estate transaction or a managed property except as allowed by law; and

(c) depositing funds of others in an account that is not a properly designated trust account.

B. Disbursements. All trust account disbursements shall conform to the following requirements.

(1) Timeliness. All funds of others pertaining to a real estate transaction shall be disbursed as soon as reasonably possible after receipt of the funds.

(2) Disbursement records. A detailed record of all funds disbursed shall be maintained by the qualifying broker and shall clearly indicate the following:

(a) check number or unique transaction identification number;

(b) date of disbursement;

(c) payee;

(d) category or purpose of disbursement;

(e) amount of disbursement;

(f) property address or legal description including unit number (if unit number is applicable).

(3) Fees due broker. Fees as determined by written agreement may be disbursed as soon as the basis for calculation can be determined and funds are available.

(4) Wrongful disbursements. The following actions involving any trust or custodial account shall be improper and shall constitute commingling:

(a) disbursing trust funds or custodial funds for personal use of the qualifying broker, an associate broker or the broker's designee;

(b) disbursing commission or commission splits from any trust or custodial account to any entity other than the qualifying broker.

(c) disbursing New Mexico gross receipts tax or other non-property related business expenses directly from a trust or custodial account;

(d) disbursing funds before the completion of the related transaction, except upon court order; this provision does not prevent a broker from transferring funds from one properly designated trust or custodial account to another properly designated trust or custodial account within the same brokerage;

(e) disbursing funds in excess of the trust or custodial account balance or in excess of a specific property or client ledger balance; and

(f) trust or custodial account overages can only be disbursed in accordance with the Unclaimed Property Act with written notification to the commission.

C. Commingling. Commingling of trust or custodial account funds is not permitted. Commingling shall include, but is not limited to, the following actions:

(1) wrongful deposits as described in this section;

(2) wrongful disbursements as described in this section;

(3) allowing a property or client ledger within a trust or custodial account to be in deficit;

(4) placing funds derived from the management of the qualifying broker's personally owned properties, or properties owned by any legally recognized entity in which the qualifying broker has any interest in a trust account containing funds of others;

(5) failing to withdraw from the trust or custodial account within a reasonable time, funds to which the qualifying broker is entitled;

(6) allowing money designated to one property or transaction to be used for the benefit of another property or transaction.

D. Exceptions to commingling.

(1) Non-trust funds may be placed in a trust or custodial account in an amount not to exceed the required minimum balance requirements of a financial institution necessary to maintain the account and avoid charges.

(2) Non-trust funds may be placed in a trust or custodial account in order to pay fees for credit card transactions and bank fees.

(3) Depositing a broker's own funds in a trust or custodial account with full disclosure to the owner of a managed property and with specific, prior written approval of the commission followed immediately by written documentation to the owner and to the commission of the deposit transaction.

(4) If a written sharing agreement specifies, funds of one property may be used for the benefit of another property owned by the same person or entity.

(5) Funds received from an owner for the benefit of all their managed properties may be credited to an owner's ledger.

N.M. Admin. Code § 16.61.23.11

16.61.23.11 NMAC - Rp, 16.61.23.10 NMAC, 1-1-2012; A. 1-1-2014, Amended by New Mexico Register, Volume XXXI, Issue 23, December 15, 2020, eff. 1/3/2021