Current through Register Vol. 46, No. 19, March 20, 2024
All earnest payments, all rents collected, property management
funds, and other trust funds received by the broker in such capacity or broker
associate or salesperson on behalf of the broker's client shall be deposited in
a trust account maintained by the broker in an identified trust account, with
the word "trust" in the name of the account, in a federally insured depository
institution and, for the purposes of this rule, may be referred to as the
"depository."
(1) All money belonging
to others received by the broker, broker associate or salesperson on the sale,
rental, purchase, or exchange of real property located in Iowa are trust funds
and must be deposited in a trust account as directed by the principals to a
transaction constituting dealing in real estate. This shall include, but not be
limited to, receipts from property management contracts; rental or lease
contracts; advance fee contracts; escrow contracts; collection contracts;
earnest money contracts; or money received by a broker for future investment or
other purpose, except a nonrefundable retainer need not be placed in an escrow
account if specifically provided for in the written agreement between the
broker and the broker's principal.
a. All
trust funds must be deposited into the broker's trust account by no later than
five banking days after the date indicated on the document that the last
signature of acceptance of the offer to purchase, rent, lease, exchange, or
option is obtained.
b. Money
belonging to others shall not be invested in any type of fixed-term maturity
account, security or certificate without the written consent of the party or
parties to whom the money belongs.
c. A broker shall not commingle personal
funds in a trust account; provided, however, that not more than $1,000 of the
broker's personal funds may be maintained in each separate account if (1) such
personal funds are separately accounted for and (2) such personal funds are
intended to be used by the broker to pay for expenses directly related to
maintaining the account.
The broker shall ensure that personal funds are deposited to
cover bank service charges as specified in Iowa Code section
543B.46
and that at no time are trust moneys used to cover any charges. Upon
notification that the broker's personal funds are not sufficient to cover
service charges initiated by the bank that are above the normal maintenance
charges, the broker shall deposit personal funds to correct the deficiency
within 15 calendar days of the closing date of that bank statement.
d. Money held in the trust
account, which becomes due and payable to the broker, shall be promptly
withdrawn by the broker.
e. The
broker shall not use the trust account as a business operating account or for
personal use. Commissions, salaries, related items and normal business expenses
shall not be disbursed directly from the trust account.
(2) Unless there is a written agreement
between all parties to the transaction to the contrary, or the provisions of
paragraph 13.1 (2)"g " apply, all interest earned on the trust
account shall be transferred on a calendar quarter basis to the state. The
amount to be remitted to the state will be the amount of interest earned less
any service charges directly attributable to the requirement of maintaining an
interest-bearing account and of remitting the interest to the state. The broker
may have the depository remit the interest directly or the broker may remit the
interest but, in either case, it shall be the responsibility of the broker to
see that the interest is remitted.
a. If the
interest is remitted by the broker, the broker should use the
commission-approved Real Estate Interest Remittance Form and include a copy of
the applicable bank statement(s) showing the interest paid and the service
charges attributable to maintaining the account.
b. If the interest is remitted by the broker,
the broker shall mail the interest remittance check and required documentation
to:
The State of Iowa
c/o Bankers Trust Company
P.O. Box 4686
Des Moines, Iowa 50306
c. The depository should use the name "Iowa
Finance Authority" and the federal tax identification number (TIN) 52-1699886
on the 1099 reporting form when reporting interest to the IRS.
d. The depository should send the 1099
reporting form to:
Iowa Finance Authority
2015 Grand Avenue
Des Moines, Iowa 50312
e. If the property management or rental
account is interest-bearing, the interest shall be transferred on a calendar
quarter basis to the state unless there is a written agreement paying the
interest to the property owner.
f.
In no event shall the broker be paid interest earned on moneys held in trust
for others by the broker.
g. A
broker shall enter into a written agreement to pay interest to a buyer or
seller in a transaction, or to a third party if requested by the parties to the
contract and agreed to by the broker, if the client's trust funds can earn net
interest. In determining whether a client can earn net interest on funds placed
in trust, the broker shall take into consideration all relevant factors
including the following:
(1) The amount of
interest that the funds would earn during the period in which they are
reasonably expected to be deposited;
(2) The cost of establishing and
administering an individual interest-bearing trust account in which the
interest would be transmitted to the client, including any needed tax forms;
and
(3) The capability of the
financial institution to calculate and pay interest to individual clients
through subaccounting or otherwise.
(3) With disclosure to and the written
agreement of all parties, a trust account may bear interest to be disbursed to
(1) the buyer or seller involved in a real estate purchase, sale or exchange
transaction, or (2) the property owner, if the property management or rental
contract contains this specific provision, or (3) as otherwise specifically
allowed or provided in Iowa Code sections
562A.12(2)
and
562B.13(2), or (4)
a third party if requested by the parties to
the contract and agreed to by the broker. Disbursements of interest on trust
funds are subject to all provisions of law that require a broker to safeguard
and account for the handling of funds of others.
(4) Receipts from property management and
rental account transactions may be deposited in a trust account separate from
real estate transaction funds. If separately maintained, this account shall not
be required to be an interest-bearing account.
a. The broker shall provide to the broker's
client a complete accounting of all moneys received and disbursed from the
trust account(s) not less often than annually.
b. A broker may only utilize a separate
property management or rents trust account for those moneys received by a
broker pursuant to a written property management or rental agreement.
(5) A broker shall be required to
open and maintain one or more trust accounts if the broker is in the practice
of depositing funds in a trust account. For each separate trust account opened,
the broker shall file with the commission a written Consent to Examine and
Audit Trust Account form, which irrevocably authorizes the commission to
examine and audit the trust account. The form of consent shall be prescribed by
and available from the commission and shall include the account names and
number and the name and address of the depository.
a. If the broker is not in the practice of
depositing trust funds in a trust account, the broker shall file an affidavit
with the commission on a form prescribed by and available from the
commission.
b. If trust funds are
received by the broker after filing an affidavit, the broker must immediately
open a trust account and file the appropriate Consent to Examine and Audit
Trust Account form with the commission.
c. As provided by Iowa Code section
543B.46(3),
a consent to examine is not required for a separate farm business operating
account in the name of the owner or owners and used by either the farm owner or
farm manager or agent to conduct business as a part of a written farm
management agreement.
d. As
provided by Iowa Code section
543B.46(3),
a consent to examine is not required for a separate property management account
in the name of the owner or owners and used by either the property owner or
property manager or agent to conduct property management as a part of a written
property management agreement.
(6) Each broker required to maintain a trust
account shall maintain at all times a record of each account, as required by
these rules, in the place of business, consisting of at least the following:
a. A record called a journal which records in
chronological order all receipts and disbursements of moneys in the trust
account.
(1) For receipts, the journal for
each trust account must include the date, name of depositor, the check number
and the amount deposited, and the name of principal or identify the
property.
(2) For disbursements,
the journal for each trust account must include the date, name of payee, name
of principal or identify the property, the check number and the amount
disbursed.
(3) The journal must
provide a means for monthly reconciliation on a written worksheet of the
general ledger balance with the bank balance and with the individual ledger
accounts to ensure agreement.
b. Real estate sales transactions shall
additionally require an individual ledger account identified by the property or
the principal, which records all receipts and disbursements of the transaction
and clearly separates the transaction from all others. The individual ledger
account shall include the date, check number, amount, name of payee or
depositor or explanation of activity with a running balance.
c. Property management trust account records
shall additionally include an individual ledger account for each tenant,
identifying the tenant's rental unit and security deposit and including all
receipts and disbursements together with check number and date. The journal for
each account shall be maintained as an owner's ledger account for all
properties owned by each owner showing receipts and disbursements applicable to
each property managed.
(1) All disbursements
must be documented by bids, contracts, invoices or other appropriate written
documentation.
(2) The running
balance may be determined at the time of monthly reconciliation.
d. Trust account supporting
documents shall include, but not be limited to, the following:
(1) Bank statements;
(2) Canceled checks;
(3) Copies of contracts, listing, sales,
rental and leasing;
(4) Closing
statements;
(5) Pertinent
correspondence; and
(6) Any
additional items necessary to verify or explain an entry.
(7) Funds, including interest on
trust funds, shall only be disbursed from the trust account as provided in Iowa
Code section
543B.46(1)
and by the terms and conditions of the
contract or escrow agreement. No funds shall be disbursed from the trust
account prior to the closing, or other than as provided by the terms of the
escrow agreement, without the informed written consent of all the parties. In
the event of a dispute over the return or forfeiture of an earnest money
deposit or the disbursement of an escrow deposit held by a broker, the broker
shall continue to hold the deposit in the trust account until one of the
following conditions is met:
a. The broker is
in receipt of a written release from all parties to the transaction consenting
to the disposition of the deposit or escrow funds; or
b. The broker is in receipt of a final
judgment of the court directing the disposition of the deposit or escrow funds;
or
c. There is a final decision of
a binding alternative dispute resolution process, or mediation directing the
disposition of the deposit or escrow funds; or
d. A civil court action is filed by one or
more of the parties to determine the disposition of the deposit or escrow
funds, at which time the broker may seek court authorization to pay the deposit
or escrow funds into court.
(8) No funds shall be disbursed from the
trust account prior to the closing without the informed written consent of all
the parties to the transaction as provided in 13.1(7), except in accordance
with this rule. Nothing in this rule requires a broker to remove money from the
broker's trust account when the disposition of such money is disputed by the
parties to the transaction. The commission will not take disciplinary action
against a broker who in good faith disburses trust account moneys pursuant to
this rule.
a. In the absence of a pending
civil court action or written agreement, it shall not be grounds for
disciplinary action when, upon passage of 30 days from the date of the dispute,
a broker disburses the earnest money deposit to a buyer, renter, or lessee in a
transaction based upon a good faith decision that a contingency has not been
met, but disbursement shall be made only after the broker has given 30 days'
written notice by certified mail to all parties concerned at their last-known
addresses, setting forth the broker's proposed action and the grounds for the
decision.
b. In the absence of a
pending civil action or written agreement, it shall not be grounds for
disciplinary action when, upon passage of six months from the date of the
dispute, a broker disburses the earnest money deposit to a seller or landlord
in a transaction based upon a good faith decision that the buyer, renter, or
lessee has failed to perform as agreed, but disbursement shall be made only
after the broker has given 30 days' written notice by certified mail to all
parties concerned at their last-known addresses, setting forth the broker's
proposed action and grounds for the decision.
c. The dispute must be legitimate. If a buyer
or seller, or a landlord or lessee, or a renter demands the return of the
earnest money deposit, the broker shall consult with the other party who may
agree or disagree with the return.
(9) Under no circumstances is the broker
entitled to withhold any portion of the earnest money when a transaction fails
to consummate even if a commission is earned. The earnest money must be
disposed of as provided in 13.1(7), 13.1(8), or 13.1(10), and the broker shall
pursue any claim for commission or compensation against the broker's
client.
(10) Interpleader. Anytime
the broker in good faith believes that the parties disputing the return of the
deposit will not agree on the disposition of the deposit or file a civil court
action to determine the disposition of the deposit, then the broker may elect
to file an interpleader action with the appropriate court pursuant to Iowa
Rules of Civil Procedure and pay the deposit into court. The broker may, in
filing such an interpleader court action:
a.
Attempt to claim a part of the deposit pursuant to the listing contract with
the seller, if the seller is successful in the suit.
b. Disclaim any part of the deposit and
request the court to restrain the buyer and the seller from naming the broker
in the civil suit and order them to litigate their claims to the
deposit.
(11) A trust
account may bear interest to be disbursed to the buyers or sellers or to a
third party if requested by the parties to the contract and agreed to by the
broker with the written approval of all parties to the contract or to the owner
if the trust account is for a property management account and the management
contract so specifies, or as otherwise specifically allowed or provided in Iowa
Code sections 562A. 12(2) and 562B. 13(2). The account shall be a separate
account from the account(s) which is to accrue interest to the state. The
broker shall not benefit from interest received on funds of others in the
broker's possession. Interest shall be disbursed to the owner or owners of the
funds at the time of settlement of the transaction or as agreed to in the
management contract and shall be properly accounted for on closing statements.
A broker shall not disburse interest on trust funds except as provided in
13.1(3) and 13.1(7). Service charges for the account are a business expense of
the broker and shall not be deducted from the proceeds.
(12) Property management account funds may be
withdrawn at any time for the purpose of returning the funds to the payee in
accordance with the terms of the contract or receipt.
(13) Property management funds may be
withdrawn when and if the broker reasonably believes, from evidence available,
that the tenant has obtained a rental or lease through information supplied by
or on behalf of the broker.
(14)
Trust funds that are not traceable to any individual for disbursement from the
trust account are unclaimed property. Unclaimed trust funds must be entered on
a separate individual ledger for accounting purposes. In accordance with Iowa
Code chapter 556, after three years, unclaimed trust funds shall be paid to:
Treasurer, State of Iowa
Unclaimed Property
P.O. Box 10430
Des Moines, Iowa 50306
