Key Takeaways
- Principal brokers must maintain escrow accounts separate from personal or business accounts
- Escrow accounts must be at an insured financial institution within New Hampshire
- Deposits on fully executed contracts must be deposited promptly into the escrow account
- Principal brokers may deposit personal funds only to cover service charges or maintain minimum balances
- The Commission has authority to audit escrow accounts, and brokers must give permission under RSA 331-A:13
New Hampshire Escrow Account Requirements
New Hampshire principal brokers must maintain escrow accounts to hold client funds separate from their personal and business funds under RSA 331-A:13.
Escrow Account Basics
What is an Escrow Account?
An escrow account (also called a trust account) is a bank account where brokers hold funds belonging to others:
| Fund Type | Examples |
|---|---|
| Contract deposits | Buyer's earnest money |
| Security deposits | Tenant deposits on rentals |
| Rent collections | Collected on behalf of landlords |
| Other client funds | Closing proceeds pending disbursement |
Where to Open
Escrow accounts must be at:
- An insured financial institution within New Hampshire
- Separate and apart from individual or office accounts
Key Requirement: The principal broker shall maintain an escrow account or accounts, separate and apart from the individual or office account.
Deposit Requirements
Timeline and Handling
| Requirement | Details |
|---|---|
| What to deposit | All deposits on fully executed contracts |
| When to deposit | Promptly |
| Where | Principal broker's escrow account |
| Account type | Separate from personal/business funds |
Who Holds Funds
| Who CAN Hold Escrow | Who CANNOT Hold Escrow |
|---|---|
| Principal broker | Salespersons |
| Managing broker (with proper setup) | Unlicensed staff |
Critical Rule: Only brokers maintain escrow accounts. Salespersons must turn over all client funds to their principal broker.
Interest-Bearing Accounts
| Aspect | Rule |
|---|---|
| Interest-bearing allowed | Yes |
| Who receives interest | Party making the deposit |
| Use of interest | Toward purchase price |
| Exception | Unless otherwise agreed in writing |
Important: The interest earned shall accrue to the party making the deposit as a sum to be used toward the purchase price unless otherwise agreed in writing.
Handling of Escrow Funds
Prohibited Practices
| Action | Status |
|---|---|
| Checks against uncollected deposits | Prohibited |
| Commingling with personal/business funds | Prohibited |
| Unauthorized use of funds | Prohibited |
| Conversion of funds | Prohibited |
Allowed Broker Deposits
A principal broker may deposit business or personal funds into an escrow account only to:
| Purpose | Allowed |
|---|---|
| Cover service charges | Yes |
| Maintain minimum balance required by bank | Yes |
| Other personal/business purposes | No |
Withdrawal and Disbursement
| Withdrawal Rule | Details |
|---|---|
| No checks against uncollected funds | Wait for deposits to clear |
| Prior to contract performance | May forward to closing agent, title company, or attorney |
| Dispute situations | Follow written agreement and court orders |
Surety Bond Requirement
Principal brokers and managing brokers must maintain:
| Requirement | Details |
|---|---|
| Amount | Not less than $25,000 |
| Term | Run concurrently with license dates |
| Purpose | Protect consumers from broker misconduct |
Commission Audit Authority
Under RSA 331-A:13, V:
| Authority | Details |
|---|---|
| Audit power | Commission may audit escrow accounts |
| Permission | Broker must give permission as condition of licensure |
| Scope | All escrow account records |
Record Keeping Requirements
Brokers must maintain:
| Record | Purpose |
|---|---|
| Bank statements | Document account activity |
| Deposit records | Document each deposit |
| Disbursement records | Document each withdrawal |
| Client ledgers | Track individual client funds |
| Transaction files | Support all transactions |
Dispute Resolution
If a principal broker holds funds and a dispute arises:
| Situation | Broker's Protection |
|---|---|
| Written agreement authorizes holding | No claim if broker follows agreement |
| Complies with mutual instructions | Protected from liability |
| Follows court orders | Protected from liability |
Who is authorized to maintain an escrow account for client funds in New Hampshire?
What is the minimum surety bond amount required for New Hampshire principal brokers?
When can a principal broker deposit personal funds into an escrow account?