Tenn. Comp. R. & Regs. 1260-02-.09 - MANAGING ESCROW OR TRUSTEE ACCOUNTS
(1) Definitions:
for purposes of this rule, the following definitions are applicable:
(a) "Commingling" is defined as the act of a
licensee maintaining funds belonging to others in the same bank account that
contains his or her personal or business funds.
(b) "Trust money" is defined as either of the
following:
1. Money belonging to others
received by a licensee who is acting as an agent or facilitator in a real
estate transaction; or
2. Any money
held by a licensee who acts as the temporary custodian of funds belonging to
others.
(2)
Each principal broker shall maintain a separate escrow or trustee account for
the purpose of holding any trust money which may be received in his fiduciary
capacity.
(3) An affiliated broker
shall pay over to the principal broker with whom he is affiliated all trust
money immediately upon receipt.
(4)
Principal brokers are responsible at all times for trust money accepted by them
or their affiliated brokers, in accordance with the terms of the
contract.
(5) Where a contract
authorizes a principal broker to place trust money in an escrow or trustee
account, the principal broker shall clearly specify in the contract:
(a) the terms and conditions for disbursement
of the trust money; and
(b) the
name and address of the person or firm who will actually hold the trust
money.
(6) Where a
contract authorizes an individual or entity other than the principal broker to
hold trust money, the principal broker will be relieved of responsibility for
the trust money upon receipt of the trust money by the specified escrow
agent.
(7) A principal broker may
properly disburse trust money:
(a) upon a
reasonable interpretation of the contract which authorizes him to hold the
trust money;
(b) upon securing a
written agreement which is signed by all parties having an interest in such and
is separate from the contract which authorizes him to hold the trust
money;
(c) at the closing of the
transaction;
(d) upon the rejection
of an offer to purchase, sell, rent, lease, exchange or option real
estate;
(e) upon the withdrawal of
an offer not yet accepted to purchase, sell, rent, lease, exchange or option
real estate;
(f) upon filing an
interpleader action in a court of competent jurisdiction; or
(g) upon the order of a court of competent
jurisdiction.
(8) Trust
money shall be disbursed in a proper manner without unreasonable
delay.
(9) Absent a demonstration
of a compelling reason, earnest money shall be disbursed, interpleaded, or
turned over to an attorney with instructions to interplead the funds within
twenty-one (21) calendar days from the date of receipt of a written request for
disbursement.
(10) No postdated
check shall be accepted for payment of trust money unless otherwise provided in
the offer.
(11) Trust money shall
be deposited into an escrow or trustee account promptly upon acceptance of the
offer unless the offer contains a statement such as "Trust money to be
deposited by:".
(12) In addition to
the escrow or trustee account referenced in paragraph (2), all trust money
received and held which relates to the lease of property must be held in one
(1) or more separate escrow or trustee accounts.
(13) Commingling of funds contained within
firm accounts is expressly prohibited.
(14) Interest-bearing escrow or trustee
accounts are neither required nor prohibited by the Commission. If utilized,
however, the following provisions shall be observed:
(a) At the time of contract execution, the
licensee shall disclose to the payor that his or her deposit will be placed in
an interest-bearing escrow or trustee account, and the licensee and the payor
shall execute a written agreement indicating the manner of disposition of any
interest earned;
(b) As a depositor
of the trust money, the licensee does not own the trust money or interest
earned thereon until properly disbursed to the licensee; and
(c) The licensee shall keep a detailed and
accurate accounting of the precise sum of the interest earned for each separate
deposit.
Notes
Authority: T.C.A. ยง 62-13-203 and 62-13-321.
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