NEW RULE FOR BROKERS REGARDING HOLDING DEPOSIT CHECKS IN MARYLAND

September 1, 2009

Holding Deposit Checks in Maryland

(MD.CODE.ANN. B&O Sec. 17-502 et. seq.)

There has been a great deal of confusion regarding the Maryland Real Estate Commission’s statement from its most recent meeting regarding dealing with deposit checks in Maryland. Maryland law regarding the depositing of trust money by brokers is as follows (emphasis added):

§ 17-502. Handling of trust money.

(a) Submission to brokers by associate brokers and salespersons.- An associate real estate broker or a real estate salesperson who obtains trust money while providing real estate brokerage services promptly shall submit the trust money to the real estate broker on whose behalf the associate real estate broker or the real estate salesperson provided the real estate brokerage services.

(b) Deposits by brokers; restricted use.-

(1) Except as otherwise provided in subsection (c) of this section, a real estate broker promptly, but not more than 7 business days after the acceptance of a contract of sale by both parties, shall depsoit trust money in an account that is maintained by the real estate broker;

(i) separately from the real estate broker's own accounts; and

(ii) solely for trust money.

(2) A real estate broker may not use trust money for any purpose other than that for which it is entrusted to the real estate broker.

(c) Exception.-Subsection (b)(1) of this section does not apply if the real estate broker receives written directions to the contrary as authorized under § 17-505(d) of this subtitle.

At its most recent meeting, the Maryland Real Estate Commission stated that, in spite of the provisions of §17-502(c) above, “for the sake of simplicity, control, insurance of compliance and to protect our membership from penalties associated with noncompliance”, that Brokers MUST deposit earnest money checks within the 7 business day time period identified in §17-502(b)(1) regardless of any written directions to the contrary by the clients. This ruling DOES NOT apply to an entity other than a broker, such as a Title Company.

Therefore, in the event that the parties direct that the deposit check be held beyond seven (7) days from contract ratification, the Escrow Agent identified in the Contract to hold the deposit must be an entity other than a broker, such as a Title Company.