Broker Sandra in Woodbridge closes a residential sale and her earned commission of $12,000 is included in the closing proceeds wired to her trust account. Sandra leaves the $12,000 in the trust account for 45 days after closing because she is busy and forgets to transfer it to her operating account. During this 45-day period, no client funds are in the trust account. Which of the following best describes the compliance issue, if any?
Correct Answer
D) Sandra has committed commingling because earned commissions may not remain in the trust account beyond a reasonable period after closing
Under N.J.A.C. 11:5-2.4, once a commission is earned and the transaction has closed, the broker must promptly withdraw those funds from the trust account. Leaving earned commission funds in the trust account beyond a reasonable time after they are no longer subject to any client claim constitutes commingling — the broker's own funds are being held in an account designated exclusively for client funds. The NJREC requires that trust accounts contain only client funds, not the broker's earned income.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Advertising regulations govern how real estate licensees may market properties and services, requiring truthful, non-deceptive advertising that includes proper identification of the brokerage.
Antitrust violations in real estate occur when competing brokerages or agents engage in practices that restrain trade, reduce competition, or harm consumers through collusion. These violations are governed by the Sherman Antitrust Act and can result in severe penalties.
Broker supervision is the legal obligation of a designated or managing broker to oversee and be accountable for the real estate activities of all salespersons and associate brokers operating under their license.
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