Trust and Escrow Accounting for New Jersey Brokers
Handling other people's money is the most broker-distinctive competency. New Jersey requires brokers to maintain trust accounts and detailed records for client funds. This chapter covers the escrow rules a broker must enforce across the office.
Separate Trust Accounts
A New Jersey broker who receives escrow money, such as an earnest money deposit, must maintain it in a separate trust or special account, distinct from the broker's personal and business operating funds. Commingling client money with the broker's own funds, or converting it, is prohibited and is a frequent basis for discipline. Only the broker is responsible for the account; a salesperson who receives funds must deliver them promptly to the broker.
Recordkeeping and Reconciliation
The broker must keep records that identify each deposit, the parties, and the transaction, and that allow the trust account to be reconciled. Records must be retained for the period required by N.J.A.C. 11:5. Accurate recordkeeping lets the broker demonstrate that all client money is accounted for and is available for audit by the Commission.
Disputed Deposits
When the parties dispute who is entitled to an escrow deposit, the broker must not simply pay it to one side. The broker holds the funds until the dispute is resolved by agreement of the parties or by a court, or follows the specific procedure allowed by New Jersey rules. Releasing disputed funds improperly can expose both the broker and the firm to liability.