2012 -- H 7154

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LC00543

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO BUSINESSES AND PROFESSIONS -- REAL ESTATE BROKERS AND

SALESPERSONS

     Introduced By: Representatives DaSilva, and Savage

     Date Introduced: January 18, 2012

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 5-20.5-26 of the General Laws in Chapter 5-20.5 entitled "Real

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Estate Brokers and Salespersons" is hereby amended to read as follows:

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     5-20.5-26. Escrows. -- (a) Escrow.

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      (1) Escrow accounts.

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      (i) Each real estate firm shall maintain an escrow account under the supervision of the

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broker qualified to do business in the name and on behalf of the corporate, partnership or

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association licensee. All those funds paid to a salesperson or paid directly to a broker shall be

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segregated on the broker's books and deposited in an account in a recognized federally insured

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financial institution in Rhode Island separate from any account containing funds owned by the

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broker. A broker or salesperson shall not commingle deposit money or other customers' funds and

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his or her own funds, use a customer's funds as his or her own, or fail to keep an escrow or trustee

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account of funds deposited with him or her relating to a real estate transaction, for a period of

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three (3) years, showing to whom the money belongs, date deposited, date of withdrawal, to

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whom paid, and any other pertinent information that the commission requires. Those records are

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to be available to the commission and the department or their representatives, on demand, or upon

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written notice given to the depository. Each broker/office supervisor shall maintain a monthly

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report as to the status of that office's escrow account, and is responsible for its accuracy.

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      (ii) A multi-office firm may either have an escrow account for each office or one central

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escrow account for the firm.

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      (iii) Funds held in escrow may be applied to the commission when earned by the listing

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company, and all earned commissions shall be paid and disbursed at the closing.

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      (iv) Whenever the ownership of any deposit monies received by a broker or salesperson

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pursuant to this section is in dispute by the parties to a real estate transaction, the broker or

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salesperson shall deposit the monies with the general treasurer within one hundred eighty (180)

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days of the date of the original deposit, those monies to be held in trust by the general treasurer

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until the dispute is mediated, arbitrated, litigated, or otherwise resolved by the parties. The parties

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to a real estate transaction may agree in writing to extend the time period by which the monies

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must be deposited with the general treasurer in accordance with regulations promulgated by the

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department of business regulation.

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      (v) The department of business regulation shall have the authority to promulgate rules

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and regulations with respect to such escrow accounts and the deposit of monies with the general

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treasurer.

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      (2) Escrow agents. - Funds or deposits placed in escrow may be held by any person or

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entity legally authorized to hold funds in that capacity, e.g., the real estate broker or attorney.

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      (b) Dual activities. - In all real estate transactions in which a broker holds more than one

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title, e.g., builder, contractor, or insurance agent, all deposit monies received must be placed in

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the brokers real estate escrow account, unless there is a contractual agreement between the

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principals to the contrary.

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      (c) Unlawful appropriation. - Pursuant to section 11-41-11.1, any licensee to whom any

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money or other property is entrusted as escrow funds, who intentionally appropriates to the

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licensee's own use that money or property, or transfers the funds from an escrow account to a

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company or personal account prior to a closing, is guilty of unlawful appropriation.

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     SECTION 2. This act shall take effect upon passage.

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LC00543

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO BUSINESSES AND PROFESSIONS -- REAL ESTATE BROKERS AND

SALESPERSONS

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     This act would require that real estate commissions be paid at the closing.

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     This act would take effect upon passage.

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LC00543

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