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The real estate field is riddled with terms and regulations that professionals must be thoroughly familiar with in order to ensure fair and transparent transactions. One such term is “commingling,” a concept that, while it may seem simple on the surface, has a number of important details to consider. Let’s unravel what exactly it is and what circumstances are excluded from this term.
What is Commingling?
According to the formal definition (10176(e)), commingling refers to the mixing of the broker's own money or property with the money or property of third parties that is received and held by the broker. This act can have serious legal and ethical implications, so it is essential to avoid any situation that could be construed as improper commingling of funds.
Exceptions to the Rule
While the definition of commingling may seem clear, there are certain circumstances that are not considered improper commingling of funds:
- Account Maintenance Funds: If funds are deposited that do not exceed $200 for the purpose of paying service charges or fees imposed to maintain the account, this is not considered “commingling.”
- Mixed Funds: Sometimes there may be funds that are partially owned by the broker's principal and partially owned by the broker. If it is not practical to keep these funds separate, they can be deposited together. However, the broker's portion must be withdrawn no later than 25 days after the deposit. It is essential that there are no disputes over the broker's share, and if there are, they must be resolved before withdrawal of funds.
- Broker Funds in Permitted Activities: If the broker deposits own funds in connection with permitted activities, such as making and collecting payments in servicing a loan, this is not seen as a violation.
Conclusion
“Commingling” is a term that all real estate professionals must fully understand in order to avoid potential legal complications. While there are situations that are excluded from this definition, it is essential to always operate with transparency and ethics, ensuring that client funds are safe and handled correctly.
