Section 16-99-4 - Client's account; trust funds; properties other than funds(a) Every brokerage firm that does not immediately place all funds entrusted to the brokerage firm in a neutral escrow depository, shall maintain a trust fund account in this State with some bank or recognized depository, which is federally insured, and place all entrusted funds therein. The trust fund account shall designate the principal broker as trustee and all trust fund accounts, including interest bearing accounts, shall provide for payment of the funds upon demand.(b) Every brokerage firm shall retain for at least three years records of all trust funds which the brokerage firm has received. All records and funds shall be subject to inspection by the commission or its representative. The three-year requirement shall be for real estate license law purposes only. The brokerage firm may be required to keep records for a longer period of time for other purposes. The records shall be kept in Hawaii in accordance with standard accounting principles and shall clearly indicate the following:(1) Names of the persons from whom funds are received, for whom deposited, and to whom disbursed;(2) Dates of receipt, deposit, withdrawal, and disbursements, and amounts received, deposited, withdrawn, and disbursed;(3) Description of the trust fund and the purpose for its establishment;(4) Purposes for the money; and(5) Other pertinent information concerning the trust fund transactions.(c) Trust fund accounts shall be either interest bearing or non-interest bearing, as agreed to in writing between the owner of funds and the principal broker or broker-in-charge receiving the funds and all other individuals who are parties to the real estate agreement. For interest bearing accounts, these same parties to the real estate agreement shall also agree in writing as to who shall pay for any early withdrawal penalty. The principal broker or broker-in-charge shall keep any interest belonging to others in the trust fund account and shall not commingle the accrued interest with the brokerage firm's, principal broker's, or broker-in-charge's general operating account or with the brokerage firm's, principal broker's, or broker-in-charge's own funds. All agreements relating to disbursements of the accrued interest from the client trust account shall be in writing, signed by the owner of the trust fund, the principal broker or broker-in-charge receiving the funds, and all other individuals who are parties to the real estate agreement. The interest accrued on any trust account deposit shall be disbursed in strict compliance with the written disbursement agreement. In the absence of a written agreement, any interest accrued shall be paid to the owner of the funds.(d) Every brokerage firm shall deposit or place trust funds received into a neutral escrow depository or in a trust fund account with some bank or recognized depository, which is federally insured, by the next business day following their receipts. The neutral escrow depository shall be located in the same state where the property is located.(e) Each principal broker or broker-in-charge who receives personal property, other than funds, in trust for other people, shall safeguard the property by placing the property by the next business day in a secure place located in the State.(f) The principal broker or broker-in-charge shall retain for at least three years records of all personal property other than trust funds coming into the possession of the principal broker or broker-in-charge as trustee. All records of the personal property held in trust shall be subject to inspection by the commission or its representative and kept in the State at the place of business. The records shall clearly indicate the following: (1) Date of receipt of the personal property to be held in trust;(2) A description of and the type of trust property received;(3) From whom the personal property held in trust was received;(4) For whose benefit the personal property is being held in trust; and(5) The date and to whom the personal property is to be delivered.(g) Property of others coming initially into the possession, custody, or control of a salesperson or broker-salesperson, to be held in trust for the benefit of the depositor or third persons, shall be received on behalf of the salesperson's or broker-salesperson's principal broker or broker-in-charge, and shall be delivered immediately by the next business day after receipt to the salesperson's or broker-salesperson's principal broker or broker-in-charge, unless the salesperson or broker-salesperson is instructed as to another time in writing by the depositor. The received property shall include but not be limited to: cash or checks as down payments, earnest money deposits, security deposits, and rental income; other checks payable to third persons or trust accounts; and personal property other than cash or checks.(h) The principal broker or broker-in-charge shall not commingle client's funds with other moneys; provided, however, it shall not constitute commingling to:(1) Hold an uncashed check until acceptance of an offer when directed to do so by the buyer or offeror;(2) Hold an uncashed check after acceptance of an offer when directed to do so by the seller or offeree; or(3) Maintain a minimum amount in the client's account to keep the account open. The fact that a check is being held in an uncashed form in paragraph (2) shall be specifically disclosed in writing to the seller or offeree before acceptance of the offer. Commingling of the client's funds with other moneys shall include, but not be limited to, keeping undisputed commissions, management fees, and other fees in the brokerage firm's client trust account beyond a reasonable time after those commissions, management fees, and other fees have been earned.
(i) A salesperson, broker-salesperson, or employee shall not handle trust properties in any way without the express written authorization of the person's principal broker or broker-in-charge. A principal broker or broker-in-charge may authorize a salesperson, broker-salesperson, or employee, in writing, to place trust properties on behalf of the brokerage firm anywhere the principal broker or broker-in-charge could place them, but shall not authorize any other disposition. A principal broker or broker-in-charge shall be held responsible for any trust properties the principal broker or broker-in-charge authorizes a salesperson, broker-salesperson, or employee to handle.(j) A principal broker or broker-in-charge shall not allow any person to have custody or control of trust properties held by the principal broker or broker-in-charge except as provided in chapter 467, HRS, and this chapter.(k) A principal broker may allow a broker-in-charge to have custody and control of trust properties on behalf of the principal broker. The principal broker and broker-in-charge shall be jointly responsible for any trust properties the principal broker authorizes the broker-in-charge to handle. (l) Information about escrow accounts and records for real estate transactions under the real estate brokerage firm shall be retained for at least three years, subject to inspection by the commission or its representative at the place of business. [Eff 12/26/74; am and ren § 16-99-4, 4/27/81; am and comp 6/28/82; am and comp 3/3/84; am 9/29/86; am and comp 11/3/90; comp 2/25/91; am and comp 5/21/01] (Auth: HRS § 467-4) (Imp: HRS §§ 467-1.6, 467-14)