Section 24. REEB 18.02 (6) (intro) and (g) are amended to read:
REEB 18.02 (6) (intro) “Real estate trust funds” means any cash, checks, share drafts, drafts, or notes received by a broker or a broker’s salesperson or time-share salespersons firm or licensee on behalf of a principal or any other person including any of the following:
(g) Initial and additional earnest money downpayments and other funds received in connection with offers to purchase, options, and exchanges, even if the broker, or salesperson, or time-share salesperson receives the downpayments or funds when negotiating the sale of real estate or a business opportunity which the broker, or salesperson, or time-share salesperson owns in whole or in part, or when negotiating the purchase of real estate or a business opportunity for ownership in whole or in part by the broker, or salesperson, or time-share salesperson.
Section 25. REEB 18.031 (1) (intro) and (a), (2), (3) and (5) (b) are amended to read:
REEB 18.031 (1) (intro) Time of deposit. A broker firm shall deposit all real estate trust funds received by the broker or broker’s salespersons or time-share salespersons firm or licensees associated with the firm in a real estate trust account within 48 hours of receipt of the trust funds. If funds are received on a day prior to a holiday or other day when the depository institution is closed, the broker firm shall deposit the funds within the next 2 business days. If a broker firm receives funds which cannot be deposited by the broker firm, the broker firm shall, no later than one business day after receipt, either:
(a) Forward the funds to the payee, if someone other than the broker firm.
(2) Duty of salesperson licensees. A salesperson or time-share salesperson licensee who receives real estate trust funds shall promptly submit the funds to the employer-broker firm of the salesperson or time-share salesperson licensee.
(3) Interest-bearing accounts.
(a) Client funds shall be deposited in an interest-bearing common trust account and the department of administration shall be the beneficial owner of the interest accruing to the account, minus any service charges. At no time may the broker firm remove or use the interest earned on such accounts.
(b) Real estate trust funds, other than client funds, may be deposited in an interest-bearing account if the broker firm obtains from the persons for whom the funds are being held written authorization to deposit the funds in an interest-bearing account and if the authorization specifies how and to whom the interest will be disbursed. None of the interest earned on the funds deposited into an interest-bearing account may inure to the benefit of the broker firm.
(5) (b) A broker firm may directly deposit into an owner’s account rental application deposits, rents and security deposits which may have been made payable to one or more owners. The broker firm or licensee associated with the firm may be designated as a signatory on the owner’s account and may make disbursements from that account to the extent authorized by the owner in writing.
Section 26. REEB 18.032, 18.033, 18.034, 18.035, 18.036 and 18.037 are amended to read:
REEB 18.032 Number of real estate trust accounts. A broker firm may maintain more than one real estate trust account, including more than one interest-bearing common trust account for client funds, if the broker firm notifies the department of these accounts, as required in s. REEB 18.035. REEB 18.033 Opening and closing real estate trust accounts. (1) Opening an account. A broker firm shall open a real estate trust account if the broker firm receives real estate trust funds.
(2) Closing an account. A broker firm may close a real estate trust account if no real estate trust funds remain in the account or for reasons specified in s. REEB 18.035. REEB 18.034 Account designation. (1) Name on trust account. A broker firm shall name the broker firm’s real estate trust account with the name appearing on the broker’s license or with a trade name submitted to the department under s. REEB 23.03 and shall include the words “trust account” in the name of the account. (2) Name on checks. A broker firm shall imprint the name of the real estate trust account on real estate trust account checks, share drafts or drafts.
REEB 18.035 Duty to notify the department. (1) Opening an account. No later than 10 days after opening any real estate trust account a broker firm shall provide the department with the name and number of the account, with the name of the depository institution in which the broker firm holds the account and with information concerning whether the account is for client funds or for real estate trust funds other than client funds. The information shall be provided on a form, as required in s. REEB 18.037. (2) Changing or closing an account. A broker firm shall notify the department no later than 10 days after a broker firm changes a real estate trust account name or number, changes the real estate trust account from one depository institution to another, closes a real estate trust account or changes a real estate trust account to or from an interest-bearing common trust account established for client’s funds. The notification shall be provided on a form, as required in s. REEB 18.037. When closing a real estate trust account, a broker firm may inform the board by letter. REEB 18.036 Authorization to examine real estate trust accounts and records.
(1) Broker’s Firm’s authorization. No later than 10 days after opening a real estate trust account a broker firm shall furnish the department authorization for the department to examine and audit all of the broker’s firm’s real estate trust account records and authorization for the department of administration to examine all of the broker’s firm’s interest-bearing common trust accounts maintained for client funds. The authorization shall be provided on a form, as required in s. REEB 18.037. (2) Depository institution’s certification. No later than 10 days after opening a real estate trust account a broker firm shall obtain the certification of every depository institution in which the broker firm maintains a real estate trust account attesting to the existence of the account and consenting to the examination and audit of the account by a duly authorized representative of the department or, in the case of interest-bearing common trust accounts maintained for client funds, the department of administration. The certification shall be provided to the department on a form, as required in s. REEB 18.037. 18.037 Form for notification and authorization. A broker firm shall provide the information and authorization as specified in ss. REEB 18.035 and 18.036 on a form provided by the department. This form shall be designated “consent to exame and audit trust account.” Section 27. REEB 18.04, 18.05, 18.06 and 18.07 are amended to read:
REEB 18.04 Authorization to sign trust account checks. A broker firm may authorize other persons to sign real estate trust account checks, share drafts or drafts drawn on the broker’s firm’s real estate trust account if the person is at least 18 years of age.
REEB 18.05 Receipt for earnest money received by the broker licensee. A broker licensee shall indicate on the offer to purchase the receipt of earnest money received from a buyer at the time the offer is drafted.
REEB 18.06 Escrow agreement for earnest money not held by the broker firm. If the parties to a transaction do not desire that the broker firm hold the earnest money in the broker’s firm’s real estate trust account, and wish to designate an escrow agent other than the broker firm, the broker licensee may not draft the escrow agreement. The escrow agreement shall be drafted by the parties or an attorney. The broker firm may not hold the funds in the firm’s real estate trust account, nor may the broker firm act in any way as custodian of the funds for the parties. The funds, pursuant to the escrow agreement, shall be held by a party other than the broker firm, such as: a bank, a savings and loan association, a credit union, or an attorney.
REEB 18.07 After closing escrow agreements. (1) By separate agreement. If the parties to a contract wish, or are required, to place funds in escrow which are to be held after closing by the broker firm in the broker’s firm’s trust account or by another person until some future occurrence, an agreement to that effect shall be prepared by the parties or an attorney. If the broker firm holds these funds, the broker firm shall place them in the broker’s firm’s real estate trust account. The broker licensee may draft the escrow agreement if a form for this purpose has been approved by the board for use by licensees pursuant to s. REEB 16.03. (2) On closing statement. A broker firm may hold in the broker’s firm’s trust account without a separate escrow agreement occupancy or possession escrows, escrows for final proration of taxes, and escrows for charges incurred by a seller but not yet billed, provided that the closing statement shows that the broker firm is holding the funds.
Section 28. REEB 18.09 (1) (intro), (2), and (3) are amended to read:
REEB 18.09 Disbursement of trust funds. (1) Proper disbursement. A broker firm who disburses trust funds from the broker’s firm’s real estate trust account under any of the following circumstances shall not be deemed to have violated s. 452.14 (3) (i), Stats.: (2) Notification of disbursement. Prior to making a disbursement of trust funds under sub. (1) (a) where the broker firm has knowledge that not all parties agree that the rejection or withdrawal occurred prior to binding acceptance, and prior to making a disbursement under sub. (1) (e), (f) and (g) where the broker firm has knowledge that either party disagrees with the disbursement, the broker firm shall attempt to notify all parties in writing of the intent to disburse. The notice shall be delivered by certified mail to the parties’ last known addresses and shall state to whom and when the disbursement will be made. The disbursement may not occur until 30 days after the date on which the notice is sent.
(3) Withdrawal of commissions. (a) A broker firm shall withdraw commissions or fees earned by the broker firm from real estate trust accounts maintained by the broker firm within 24 hours after transactions are consummated or terminated, or after the commissions or fees are earned in accordance with the contract involved.
(b) A broker firm providing property management services shall disburse the fee earned for providing property management services as a regular monthly basis unless otherwise agreed in a written property management agreement signed by the parties to that agreement.
Section 29. REEB 18.10 and 18.11 are amended to read:
REEB 18.10 Comingling funds prohibited. (1) Depositable funds. A broker firm shall deposit only real estate trust funds in the broker’s firm’s real estate trust account.
(a) Except for sub. (b), a broker firm shall not commingle the broker’s personal funds or other funds in the real estate trust account.
(b) A broker firm may deposit and maintain a sum not to exceed $300.00 from the broker’s personal funds in any real estate trust account. Such sum shall be specifically identified and deposited to cover service charges relating to the real estate trust account.
(2) Additional funds. A broker firm shall deposit additional personal funds in sums consistent with sub. (1) (b) in the broker’s firm’s real estate trust account within 10 business days following receipt of a statement or other notification from a depository institution that a service charge has been made against the account for which insufficient personal funds are available in the real estate account.
REEB 18.11 Non-depositable items. A broker firm shall not hold any instrument, equity or thing of value which is not depositable in a real estate trust account. Non-depositable items shall be held by one of the parties to a transaction or some other party, subject to an escrow agreement prepared by the parties or an attorney.
Section 30. REEB 18.13 (intro), (1) (intro), (2), (3), (4), (5), and (6) (intro) and (e) are amended to read:
REEB 18.13 Bookkeeping system. Each broker firm shall maintain and be responsible for a bookkeeping system in the broker’s firm’s office consisting of at least the following:
(1) Cash journal. A broker firm shall maintain a record, called a journal showing the chronological sequence in which real estate trust funds are received and disbursed as follows:
(2) Ledger. A broker firm shall maintain a record including the receipts and the disbursements as they affect each particular transaction, including transactions between buyer and seller, landlord and tenant, etc. The ledger entry shall include the names of all parties to a transaction, the dates and the amounts received and the name of the party or parties providing the money if different from the buyer. Ledger entries shall include at least the date, payee, number of the check, share draft or draft and amount when funds are disbursed. The ledger shall include a running balance and segregate each transaction. The broker firm shall maintain a separate ledger or separate section of the ledger for each of the various kinds of real estate transactions, including sales, rental collections, or mortgage and land contract collections.
(3) Account reconciliation. The broker firm or a person designated by the broker firm shall reconcile the real estate trust account or accounts in writing each month except in the case where there has been no activity during the month. The written reconciliation shall include at least the ending account statement balance, the date and amounts of the deposits in transit, the number of the check, share draft, or draft, and amount of checks, share drafts, or drafts written but not paid by the depository institution as of the ending date shown on the account statement to be reconciled, and the reconciled account statement ending balance.
(4) Trial balance. The broker firm shall prepare or have prepared, in conjunction with sub. (3), a written listing of all open items in the real estate trust account. The written listing shall be referred to as the “trial balance”. The listing shall include at least the names of all parties to the transaction and the amount held in trust for the parties at the time corresponding to the account reconciliation. The broker firm may in lieu of the names of the parties to the transaction substitute the ledger page number or other means of identification from the ledger to label the funds in the trial balance.
(5) Validation. The broker firm or a person designated by the broker firm shall review the reconciled account statement balance, the open ledger account listing, and the journal running balance to ensure that all of these records are valid and in agreement as of the date the account statement has been reconciled.
(6) Use of computers. A computerized system may be used to maintain the broker’s firm’s bookkeeping system if:
(e) All records which are not maintained as written paper records are capable of being immediately converted to written paper records and immediately shall be made available for inspection and copying by the department and exact and completed copies promptly sent to the department upon the request of the department without charge to the department or board for the purposes of an audit or investigation.
Section 31. REEB 18.14 is amended to read:
REEB 18.14 Violation of rules. A broker firm who fails to comply with the rules in this chapter shall be considered to have demonstrated incompetency to act as a licensed individual broker or a licensed broker business entity in a manner as to safeguard the interests of the public, as specified in s. 452.14 (3), Stats. Section 32. REEB 23.03 and 23.04 are amended to read:
REEB 23.03 Trade name. (1) Definition. “Trade name” means the name other than the name appearing on the broker’s license, under which the broker licensed individual broker or a licensed broker business entity advertises or does business.
(2) Notification. A licensed broker licensee, before doing business under any trade name, shall notify the department in writing of the trade name.
REEB 23.04 Change of form of business organization. (1) Application. A licensed broker business entity who intends to conduct business under a different form of business entity type, shall apply for a new license. Upon payment of the fee specified in s. 440.05 (1), Stats., the department board shall issue to the applicant, without examination, a license under the new form of entity business type. (2) New license required. A broker business entity shall not engage in real estate activities under a different form of business entity type until a new license is issued.
Section 33. REEB 24.01 (3) is amended to read:
REEB 24.01 (3) If a licensee violates rules in this chapter, the licensee has demonstrated incompetency to act as a broker, salesperson or time-share salesperson in such manner as to safeguard the interests of the public under s. 452.14 (3) (i), Stats. However, the term “incompetency” is not limited in its meaning to violations of this chapter. Section 34. REEB 24.02 (2) is repealed.
