California Real Estate SalespersonLaws of Agency and Fiduciary DutiesMedium
A broker holding client trust funds from a buyer's earnest money deposit fails to place the funds into a neutral escrow or trust account within the time required by law, instead holding the uncashed check in the office file for two weeks. Which fiduciary duty has the broker most directly violated?
- AThe duty of full disclosure of material facts
- BThe duty of confidentiality
- CThe duty of loyalty
- DThe duty to account for client funds
Show answer & explanationAnswer & explanation
Correct answer: D. The duty to account for client funds
California law requires that trust funds be deposited into a neutral escrow depository or the broker's trust account within three business days of receipt. Failing to timely deposit and properly track client funds constitutes a breach of the fiduciary duty to account, which requires careful handling and recordkeeping of all money and property belonging to clients.
Why the other options are wrong
- A. Incorrect; disclosure duties involve material facts about the property or transaction, not fund deposits.
- B. Incorrect; confidentiality concerns protecting sensitive information, not trust fund deposit timing.
- C. Incorrect; loyalty concerns conflicts of interest, not fund handling procedures.
Duty to Account (Trust Funds)
An agent's fiduciary duty to properly receive, deposit, track, and account for all client funds and property, including timely deposit of trust funds into a neutral account.
- Trust funds must be deposited within 3 business days of receipt.
- Commingling trust funds with personal/business funds is prohibited.
- Violation can result in DRE discipline separate from contract issues.
Memory trick: Client money needs a home fast—three days, no delays.