North Dakota Administrative Code Title 70.5 - Real Estate Trust Account Committee
Overview: North Dakota Administrative Code Title 70.5 — Real Estate Trust Account Committee
The Real Estate Trust Account Committee (RETC) is a regulatory body established under North Dakota law to oversee the handling of trust funds by real estate brokers and agents. Its primary function is to protect the public by ensuring that funds held in trust accounts—such as earnest money deposits or other client funds—are properly managed and safeguarded.
Purpose and Function of the Real Estate Trust Account Committee
Primary Responsibilities:
Oversight of trust accounts maintained by real estate brokers and agents.
Ensuring compliance with rules governing the handling of client funds.
Investigating complaints involving mismanagement or misuse of trust funds.
Auditing trust accounts and requiring brokers to submit reports and records.
Disciplinary actions in cases of violations, including fines or license suspension.
Providing guidance and interpretation of trust account rules.
The committee acts as a guardian of integrity in real estate transactions involving trust money.
Key Provisions in Title 70.5 - Real Estate Trust Account Committee
Establishment and Composition
The committee is composed of members appointed by the Real Estate Commission or other governing authority.
Members typically include real estate professionals with knowledge of trust accounting.
Definitions and Scope
Defines what constitutes a "trust account," including escrow accounts where client money is held.
Specifies types of funds covered, such as earnest money, rent, security deposits.
Recordkeeping and Reporting Requirements
Brokers must keep detailed records of all trust account transactions.
Periodic reports and reconciliations are required.
The committee has authority to inspect these records on demand.
Handling of Trust Funds
Rules on timely deposit of funds into trust accounts.
Restrictions on commingling personal and client funds.
Proper disbursement procedures and documentation.
Audits and Investigations
The committee can initiate audits or investigations based on complaints or random selection.
Brokers must cooperate fully and provide requested documents.
Disciplinary Measures
The committee can recommend sanctions, including fines, license suspension, or revocation.
Violations can also lead to civil or criminal liability under state law.
Dispute Resolution
Procedures for handling disputes between parties regarding trust funds.
Hearings or appeals may be provided.
Interaction with Case Law
While the committee primarily functions through administrative regulation, court cases can involve:
Disputes over mishandling of trust funds
Due process challenges to disciplinary actions
Interpretation of statutes and administrative rules
Civil liability claims based on committee findings
1. Cases on Mismanagement of Trust Funds
In cases where a broker is accused of misappropriating or improperly handling trust funds, courts have examined:
Whether the broker followed statutory and administrative rules.
The adequacy of recordkeeping and segregation of funds.
The evidence provided by the Real Estate Trust Account Committee in disciplinary proceedings.
Typical judicial approach:
Courts tend to uphold the committee’s authority if procedural fairness is followed and if the evidence shows clear violation. Misuse of trust funds is treated seriously due to the fiduciary nature of the broker’s duty.
2. Due Process in Disciplinary Proceedings
Real estate brokers or agents disciplined by the committee may challenge:
Whether they were given proper notice.
Opportunity to be heard.
An impartial tribunal.
Courts have emphasized the importance of procedural due process in administrative actions. If the committee fails to comply with these requirements, disciplinary decisions may be overturned.
3. Limits of Committee Authority
Disputes sometimes arise about whether the committee exceeded its statutory authority, such as:
Imposing sanctions beyond the scope allowed by law.
Conducting investigations without proper jurisdiction.
Courts analyze the governing statutes and administrative rules to determine if the committee acted within its powers. Actions outside those limits are invalidated.
4. Civil Litigation Based on Committee Findings
Findings by the committee can support civil lawsuits by clients against brokers for breach of fiduciary duty or conversion of funds. While the committee itself does not adjudicate civil claims, its investigations and reports are often used as evidence.
Summary
North Dakota Administrative Code Title 70.5 governs the Real Estate Trust Account Committee’s oversight of trust accounts managed by real estate brokers and agents. It ensures the protection of client funds by enforcing recordkeeping, auditing, and compliance rules.
Case law involving the committee typically addresses:
Proper handling and safeguarding of trust funds.
Due process in administrative disciplinary proceedings.
Limits of committee powers.
Use of committee findings in civil litigation.
The committee acts as a critical safeguard in maintaining public trust in real estate transactions.
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