Current through Register 2021 Notice, Register No. 40, October 1, 2021
The relationship between a real estate broker and a client
for whom the broker holds funds in trust is an agency relationship. As an
agent, the broker owes a fiduciary duty to the client regarding the handling of
the trust. Any benefit received by the broker relating to the broker's handling
of client funds in trust belongs to the client by law, and the broker must pass
that benefit along to the client.
Unless in possession of written permission from the client, it is unlawful for
any real estate broker, including any corporate broker, to receive, directly or
indirectly, any commission, compensation, or other consideration, whether
personal or professional, from any person or institution other than the client
as an inducement for the placement of a trust fund account in accordance with
of the Business and Professions Code. Actual placement of a trust fund account
is not a precondition to a violation of this section, whether the violation is
or is not a per se violation pursuant to subsection (c), below.
(b) For purposes of this section, a
"compensating balance" is a balance maintained in a checking account or other
account in a bank or other recognized depository in the name of a real estate
broker for the purpose of paying bank fees on a separate trust fund
Unless in possession
of written permission from the client as described in subsection (a), the
following activities, whether performed directly or indirectly, are deemed per
se receipt of inducements for the placement of trust account business by any
person and are unlawful:
(1) Receiving or
requesting payment for, accepting or requesting provision of, or accepting or
requesting assistance with business expenses, including, but not limited to,
rent, employee salaries, furniture, copiers, facsimile machines, automobiles,
telephone services or equipment, or computers.
(2) Receiving or requesting receipt of any
form of consideration intended for the benefit of the broker, rather than the
trust account itself, including cash, below market rate loans, automobile
charges, or merchandise or merchandise credits.
(3) Receiving or requesting to receive on
behalf of the broker or corporation, compensating balances or benefits in the
pricing or fees for the maintenance of a compensating balance
(4) Receiving or
requesting provision of all, or any part, of the time or productive effort of
any employee of the bank or other recognized depository for any service
unrelated to the trust account.
Receiving or requesting expenditures for food, beverages, and
Receipt or request of receipt of the following are not deemed to be unlawful or
in violation of this section:
items with a permanently affixed company logo of the bank or other recognized
depository with a value of not more than ten dollars ($10) each. "Promotional
item" does not include a gift certificate, gift card, or other item that has a
specific monetary value on its face, or that may be exchanged for any other
item having a specific monetary value.
(2) Receipt or requested receipt of education
or educational materials exclusively related to the business of trust fund
management if continuing education credits are not provided.
(e) The receipt or requested
receipt of any form of consideration as an inducement for the placement of a
trust account not specifically set forth in this section shall not be presumed
lawful merely because it is not specifically prohibited.