Section 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; or2. 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.Tenn. Comp. R. & Regs. 1260-02-.09
Original rule certified June 7, 1974. Repealed and refiled March 3, 1980; effective April 27, 1980. Amendment filed September 30, 1980; effective December 15, 1980. Amendment filed January 21, 1983; effective February 22, 1983. Amendment filed April 17, 1985; effective May 17, 1985. Amendment filed March 16, 2010; effective June 14, 2010. Amendment filed July 20, 2015; effective 10/18/2015.Authority: T.C.A. § 62-13-203 and 62-13-321.