The Maryland Real Estate Guaranty Fund and Trust Money
Maryland protects consumers through the Real Estate Guaranty Fund and strict trust-account rules. This chapter explains what the fund does, its effect on a licensee, and how proper trust handling prevents claims.
Purpose of the Guaranty Fund
The Maryland Real Estate Guaranty Fund reimburses members of the public who obtain a final judgment against a licensee for conduct such as fraud or misrepresentation in a licensed transaction and cannot otherwise collect. It is a consumer-protection fund with statutory per-claim limits, not an operating account, a lending program, or general business insurance for brokers.
Effect on the Licensee
When the fund pays a claim arising from a licensee's misconduct, that licensee's license is suspended until the licensee repays the fund, typically with interest. The fund pays the injured consumer first and then pursues repayment from the responsible licensee. This structure protects consumers while deterring misconduct.
Trust Money and Prevention
Many claims arise from mishandled trust money. Maryland brokers must keep client funds in a separate trust/escrow account, never commingle them with business or personal funds, and never use them for other purposes. Disputed deposits must be retained until the parties agree in writing or a court directs disbursement. Proper trust handling is the broker's best protection against Guaranty Fund claims and discipline.