Escrow Accounts in Massachusetts
Because only a broker may hold client money in Massachusetts, escrow handling is a core broker responsibility. This chapter covers the escrow account, disputed deposits, and recordkeeping.
Holding Client Money
Only a Massachusetts broker may hold client escrow funds, and those funds must be kept in a separate escrow account, never commingled with the broker's business or personal money. A salesperson who receives a deposit must deliver it promptly to the broker. Commingling or converting escrow money is a serious violation of 254 CMR and license law.
Disputed Deposits
When a buyer and seller dispute who is entitled to an escrow deposit, the broker must keep the money in escrow and may not unilaterally decide who receives it. Release should occur only on the parties' written agreement or as directed through an authorized legal process such as a court order or interpleader. Unilateral release or conversion exposes the broker to discipline and liability.
Recordkeeping
A broker must maintain accurate, current escrow records so each client's funds are identifiable and the account reconciles to the total held, and must make those records available to the Board. Client money may never be combined with operating funds. Sound recordkeeping protects consumers and is the broker's best defense in an audit or a complaint.