California Real Estate SalespersonPractice of Real Estate and DisclosuresHard
A salesperson working under a broker accepts a trust fund deposit from a buyer but fails to forward it to the broker within the time required by law. Who bears ultimate responsibility to the DRE for this violation?
- AThe buyer, for choosing to work with an unsupervised salesperson
- BThe escrow holder, since all funds should have been routed directly through escrow
- CThe employing broker, who is responsible for supervising trust fund handling by licensees
- DThe salesperson exclusively, since the broker had no direct knowledge of the transaction
Show answer & explanationAnswer & explanation
Correct answer: C. The employing broker, who is responsible for supervising trust fund handling by licensees
California law places ultimate responsibility for trust fund handling on the employing broker, who must supervise all licensees acting under their license, including proper and timely handling of trust funds received by salespersons.
Why the other options are wrong
- A. Buyers are not responsible for a licensee's internal compliance failures.
- B. Escrow holders are not automatically involved in every deposit unless specified in the transaction terms.
- D. The broker cannot escape liability by claiming lack of knowledge; supervision is a broker duty.
Broker Supervisory Liability for Trust Funds
Employing brokers are ultimately responsible to the DRE for the proper and timely handling of trust funds received by their salespersons.
- Brokers must supervise all trust fund handling activities of their agents
- Salesperson violations can result in disciplinary action against the broker's license
- Trust funds received by a salesperson must reach the broker within required timeframes
Memory trick: The broker's license is on the line for every agent's trust fund slip-up.