Key Takeaways
- Brokers-in-charge must maintain a trust account at a South Carolina insured financial institution
- Trust accounts must be designated "trust" or "escrow" in the account name
- Cash/certified funds must be deposited within 48 hours; checks within 48 hours after lease/contract signing
- Commingling broker funds with client funds is prohibited (small maintenance amount allowed)
- SCREC has authority to audit trust accounts and take disciplinary action for violations
South Carolina Trust Account Requirements
South Carolina brokers-in-charge must maintain trust accounts to hold client funds separate from their operating funds under S.C. Code Section 40-57-136.
Trust Account Basics
What is a Trust Account?
A trust account (also called an escrow account) is a demand deposit account where brokers hold funds belonging to others:
| Fund Type | Examples |
|---|---|
| Earnest money deposits | Buyer's good faith deposit |
| Security deposits | Tenant deposits on rentals |
| Rent collections | Collected on behalf of landlords |
| Other client funds | Closing proceeds pending disbursement |
Account Requirements
Trust accounts must meet these requirements:
| Requirement | Details |
|---|---|
| Account type | Demand deposit account |
| Location | Insured financial institution authorized in SC |
| Account name | Must include "trust" or "escrow" |
| Account title | In name of real estate brokerage firm |
Key Requirement: The account name must clearly identify it as a trust or escrow account.
Who Maintains Trust Accounts
| Role | Trust Account Authority |
|---|---|
| Broker-in-Charge (BIC) | Required to maintain and control |
| Property Manager-in-Charge (PMIC) | Required to maintain and control |
| Associate (Salesperson) | Cannot maintain trust account |
| Broker (not BIC) | Cannot maintain own trust account |
Critical Rule: Associates must deliver all client funds to the BIC no later than the next business day after receipt.
Deposit Requirements
Timelines for Different Transaction Types
Rental/Lease Transactions
| Fund Type | Deposit Deadline |
|---|---|
| Cash or certified funds | Within 48 hours of receipt |
| Checks | Within 48 hours after lease/rental agreement is signed |
Note: Saturdays, Sundays, and bank holidays are excluded from the 48-hour count.
Sales Transactions
| Situation | Deposit Deadline |
|---|---|
| Earnest money | Per contract terms (typically within 48 hours of acceptance) |
Prohibited Practices
Commingling
Commingling is mixing client funds with broker's personal or business funds. It is strictly prohibited.
| Allowed | NOT Allowed |
|---|---|
| Client funds in trust account | Client funds in operating account |
| Small BIC deposit to maintain account | Large broker funds in trust account |
| Small deposit to cover bank fees | Using client funds for business expenses |
Conversion
Conversion is using client funds for unauthorized purposes. It is:
- The most serious violation a BIC/PMIC can commit
- Considered misappropriation of trust funds
- Potentially criminal (not just administrative)
- Grounds for immediate license revocation
| Consequence | Description |
|---|---|
| License revocation | Almost certain |
| Criminal charges | May be prosecuted |
| Civil liability | Must repay funds |
| Disciplinary action | Severe penalties |
Warning: "Borrowing" from the trust account for business expenses, even with intent to repay, is conversion and may result in criminal prosecution.
Record Keeping Requirements
Required Records
Brokers-in-charge must maintain:
| Record | Description |
|---|---|
| Bank statements | Monthly statements from financial institution |
| Deposit receipts | Documentation of each deposit |
| Check records | Documentation of each disbursement |
| Client ledgers | Individual records for each client |
| Transaction records | All transaction documentation |
| Reconciliation records | Monthly bank reconciliations |
Record Retention
| Requirement | Duration |
|---|---|
| Trust account records | Minimum 3 years |
| Transaction files | Minimum 3 years |
SCREC Audits
SCREC has authority to:
- Audit trust accounts periodically
- Inspect records without advance notice
- Review reconciliations for accuracy
- Take disciplinary action for violations
Common Audit Findings
| Issue | Consequence |
|---|---|
| Shortage of funds | Serious violation - potential revocation |
| Poor record keeping | Warning to suspension |
| Late deposits | Warning to fine |
| Commingling | Fine to revocation |
| Conversion | Revocation and potential criminal charges |
Who is authorized to maintain a trust account for client funds in South Carolina?
Within what timeframe must cash or certified funds be deposited into a trust account for a rental transaction?
What is the most serious trust account violation a broker-in-charge can commit?