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CIRCULARS

Circular No. 02-10 (CR) October 2002
Trust Accounts

Practitioners may sometimes come into contact with cash or cheques drawn in favour of their company which they receive or hold on behalf of their clients, e.g., funds from a prospective purchaser/tenant for transfer to the owner of a property as initial deposit once an agreement is reached. At common law, a trust relationship arises when the owner of the funds entrusts his funds to a trustee for managing the same. The estate agent, as trustee, owes fiduciary duties to the owner of the funds, i.e., the client on whose behalf he is holding the funds. Under section 12(3) of the Practice Regulation, a licensed estate agent shall deposit all moneys received or held for or on account of a client in a trust account maintained at an authorized institution (a bank, restricted licensed bank or deposit-taking company as defined in the Banking Ordinance). This is to prevent an estate agent from mixing its client's moneys with its own moneys.

Under section 12(4) of the Practice Regulation, a licensed estate agent shall retain a copy of the deposit slip of any money deposited into its trust account for 3 years. Under section 12(5), he shall not withdraw money from the trust account except in accordance with his client's instructions and by a cheque or by electronic fund transfer.

Those in charge of management of estate agency companies (including branch managers) should establish a system for complying with the above regulations and give clear instructions to their staff so that moneys received on weekends or public holidays which cannot be deposited into the company's trust account may be handled properly.

Estate agents are liable to repay to their clients moneys received or held on behalf of their clients and must not use the moneys from a trust account to pay for the company's expenses or for other purposes. He must not deduct or withhold part or all of such moneys to set off any commission.

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