N.J. Admin. Code § 11:5-5.1 - Special accounts for funds of others; commingling

Current through Register Vol. 54, No. 7, April 4, 2022

(a) Every resident real estate broker shall establish and maintain, in an authorized financial institution in New Jersey, and every reciprocally licensed Real Estate broker shall establish and maintain in an authorized financial institution in New Jersey or the State wherein he has a resident real estate broker's license, a special account or special accounts, separate and apart from other business or personal accounts, for the deposit of all moneys or others received by the broker acting in said capacity, or as escrow agent, or as temporary custodian, in a real estate transaction.
(b) Every real estate broker shall file with the broker's application for licensure or license renewal an affidavit or certificate setting forth the name or names of the financial institution or institutions where said special account or accounts have been established and shall identify any and all account numbers. Any change in an existing account or the establishment of any new account shall be immediately reported to the Real Estate Commission in the form of an affidavit or certification.
(c) In construing 45:15-17(o), the following shall be considered to constitute commingling by a licensee:
1. Mingling the money of his principals with his own;
2. Failure to maintain and deposit promptly in a special account in an authorized financial institution, separate and apart from personal or other business accounts, all moneys received by a real estate broker acting in said capacity, or as escrow agent, or as the temporary custodian of the funds of others in a real estate transaction; or
3. Failure to promptly segregate any moneys received which are to be held for the benefit of others.
(d) Where the nature of a given real estate transaction is such that the commissions earned by a broker in connection with services rendered in said transaction are included among the funds deposited to the broker's trust account, the portion of such funds deposited to the broker's trust account which constitute the broker's commission shall be promptly paid from the trust account, with appropriate annotations to the broker's business records to indicate the amount and source of such commissions; provided, however, that such broker shall have been previously authorized to make such disbursement.
(e) Within the meaning of this section, the word "promptly" means not more than five business days next following the receipt of the money or property of another. However, where monies are received by a licensee as provided in (c)2 above as a good faith or earnest money deposit accompanying an offer to buy or lease property, if during the five business day period next following the date of the licensee's receipt of those funds the offer is withdrawn prior to acceptance by the offeree or is rejected with no counteroffer made by the offeree, the licensee need not deposit those funds into an escrow or trust account but may, upon the request of the offerer, return them in the same form in which they were received to the offerer. In all other cases, the licensee must deposit such monies within five business days of receipt. Examples of such cases include transactions where negotiations are ongoing, or if a contract or lease is being reviewed by an attorney, or if subsequently to the rejection of an offer the offerer has requested the licensee to retain the monies in the event that the offerer determines to submit another offer on the same or a different property.
(f) The maintenance of clearly nominal amounts of the licensee's funds in trust accounts solely to provide continuity in such account or to meet bank service charges shall not be construed to be commingling.
(g) Where any law or governmental regulation compels maintenance of a fixed amount of the funds of a licensee is a trust account for the purpose of providing a safety factor, the maintenance of such fixed amount shall not be construed to be commingling.
(h) Every person licensed as a broker of record or as a sole proprietor broker shall be a signatory on the escrow or trust account(s) of their brokerage firm. Only individuals who are actively licensed by the Commission as a real estate broker-salesperson or salesperson may be additional signatories on escrow or trust accounts.
(i) Brokers may accept payments to be held in trust or in escrow, or as the temporary custodian of the funds of others in any real estate transaction, in the following forms: cash; a negotiable instrument payable to the broker's firm; a charge against a check debit card resulting in a credit to the broker's trust or escrow account; or a wire transfer of funds directly from an account of the payor to the trust or escrow account of the broker. As provided in this subsection, brokers may also accept deposit and rent payments to be held by them in trust or in escrow or as a temporary custodian in the form of charges made upon the credit cards of tenants in short term rental transactions.
1. All payments to be held by a broker in trust or in escrow, or as the temporary custodian of monies in a real estate transaction, made in the form of cash, negotiable instruments, wire transfers or by charges made upon credit cards or check debit cards shall be recorded in the broker's trust or escrow account ledger and as otherwise required by 11:5-5.4.
2. Brokers shall not accept payments made through credit card charges in any real estate transaction other than a short term rental. For the purposes of this subsection, a "short term rental" is a rental of a residential property for not more than 125 consecutive days with a specific termination date.
3. Brokers who accept payments in the form of credit card charges in short term rentals shall cause those payments to be credited to a special trust or escrow account, distinct from the escrow or trust account(s) maintained by the broker for other purposes. Brokers who accept such payments shall also maintain a business account, separate and apart from all trust or escrow accounts including the account to which the credit card charges shall be credited. The said business account may be the same business account maintained by the broker for general purposes.
4. Before accepting any payment in the form of a credit card charge on a short term rental, a broker shall inform the owner in writing of the potential for such payments to be "charged-back" by the tenant and obtain written authorization signed by the owner for the broker to accept such payments.
i. For the purposes of this subsection, "charged-back" means the recrediting of a previously charged payment to the account of a cardholder through the electronic debiting of an account of the broker.
ii. Where an owner's written authorization is secured by the listing broker, it shall be made a part of or an addendum to a listing agreement.
iii. In all cases, the owner's written authorization shall be retained by the broker to whom it was given as a business record in accordance with N.J.A.C. 11:5-5.4.
5. In the event that a dispute concerning a charged-back payment arises between a broker and a consumer, under no circumstances may the broker apply or set-off against the disputed amount any monies paid to the broker on another transaction in which the same consumer is a party.
6. Brokers who accept credit card charges in payment of deposits or rent on short term rentals shall formulate a written statement of their policy on credit card payment cancellations. All such cancellation policies shall include:
i. An indication of the time period during which the cardholder may cancel the charged payment made to the broker; and
ii. A statement that, in the event a cancellation request is not received by the broker within the specified cancellation time period, the request will not be honored and the disposition of the monies credited to the broker will be governed by the terms of the lease or rental agreement between the landlord and the cardholder.
7. In no event shall the cancellation period terminate prior to the delivery to the cardholder of a fully executed written lease containing the final terms of the rental agreement, or the full acceptance by the parties of the final terms of a verbal rental agreement.
8. Brokers shall provide copies of the written cancellation policy in the following manner:
i. To property owners upon the earlier of the broker obtaining a listing on the rental property or presenting an offer to rent the property; and
ii. To prospective tenants at the time of first accepting a payment in the form of a credit card charge. In the event that the same tenant makes subsequent payments on the same rental transaction through charges against a credit card, the broker accepting such payments shall not be required to provide additional copies of the written cancellation policy.
9. Except as otherwise provided in (j) below, brokers who accept payments in the form of credit card charges shall comply with all restrictions and requirements imposed by 45:15-17(o) and this section with regard to the deposit and maintenance of such funds.
(j) In all cases, the amount credited to a broker's special escrow or trust account as a result of a charged payment on a short term rental transaction shall be the full amount of the payment made by the tenant to the broker. All transaction fees payable by the broker to the company which issued the credit card shall not be paid before the full amount of the charged payment is credited to the broker's special escrow or trust account. Brokers who accept payments through charges on credit cards shall also comply with one of the procedures specified in (j)1 and 2 below.
1. A business account of the broker shall be designated in the contract between the broker and any company whose credit card charges the broker shall accept as the sole source of funds for the payment by the broker of all credit card transaction fees due to the company, and the sole source of funds for all charge-backs which may be assessed against the broker by the company; or
2. The broker shall maintain a reserve amount of the broker's funds in the special escrow or trust account to which charged payments will be credited. The said reserve shall be sufficient to cover all transaction fees incurred by the broker on charged transactions and all estimated charge-backs of payments by cardholders. The maintenance of such reserve funds in the said special escrow or trust account shall not be construed as commingling. In all cases where brokers utilize this procedure:
i. Transaction fees debited from the said reserve amount shall be replenished by the broker on at least a monthly basis;
ii. In the event that a broker is notified that a charge-back has occurred after some or all of the funds received through the charged-back payment have been disbursed, the broker shall, within one business day of receipt of such notice, replenish the reserve funds in the special escrow or trust account in an amount equal to the amount debited from the reserve through the charge-back; and
iii. Brokers may replenish or increase the said reserve amount as often as necessary. Brokers may only reduce the said reserve amount on an annual basis. All credits to and debits from the special escrow or trust account made by the broker to replenish, increase or decrease the reserve amount shall be duly noted in the business records of the broker and maintained as such as required by 11:5-5.4.


N.J. Admin. Code § 11:5-5.1
As amended, R.1982 d.101, effective 4/5/1982.
See: 13 New Jersey Register 302(b), 14 New Jersey Register 345(b).
New (a) and (b) added, (c) marked "Reserved"; old (a)-(e) numbered as (d)-(h).
As amended, R.1983 d.471, effective 11/7/1983.
See: 15 New Jersey Register 1343(a), 15 New Jersey Register 1865(c).
Subsections (d) through (h) recodified as (c) through (g).
Amended by R.1993 d.8, effective 1/4/1993.
See: 24 New Jersey Register 3483(a), 25 New Jersey Register 118(a).
Exception allowed to deposit of funds entrusted to real estate broker as escrow agent.
Amended by R.1998 d.497, effective 10/5/1998.
See: 30 New Jersey Register 2333(a), 30 New Jersey Register 3646(a).
In (c), deleted "or other property" following "money" in 1, and substituted "moneys" for "properties" in 3; in (d), deleted ", the portion of such funds" preceding "which constitute" and substituted "indicate" for "define" following "records to"; and added (h).
Amended by R.1999 d.444, effective 12/20/1999.
See: 31 New Jersey Register 2675(a), 31 New Jersey Register 4282(a).
Added (i) and (j).

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