but the term is not otherwise defined or limited in its use. Its use clearly implies that funds in addition to the funds specifically identified as trust funds such as “earnest money deposits”, etc., may be considered trust funds and therefore required to be held in the broker’s trust account.


3 The term “retainer fee” is not defined in the Agreement or defined in Georgia Real Estate License Law. Generally, a retainer fee is an upfront fee paid by a client to the broker for services to be performed by the broker at a later date. The Agreement itself states that the “retainer fee” is nonrefundable except in a closing where the broker is paid a commission and the “retainer fee” shall be refunded to the client. Otherwise, upon expiration of the “Agreement” the “retainer fee” shall be retained by the broker for expense reimbursement.


4 Though the term “retainer fee” is not specifically defined as “trust funds,” the retainer fee becomes “trust funds” because the funds are required to be held by the broker pending a future event. O.C.G.A. §43-40-20 (e) states … “A broker shall not be entitled to any part of the earnest money, security deposit, or “other trust funds” paid to the broker in connection with any real estate trans- action as part or all of the broker’s commission or fee until the transaction has been consummated or terminated.” This Code section treats a “retainer fee” as “trust funds” by prohibiting the fee from being disbursed by the broker until the real estate closing or the contract has termi- nated. Before either of these events has occurred, the broker “shall not be entitled” to the funds and therefore they must be maintained for the client in a trust account. The broker is a temporary custodian for his client which necessitates of a trust account.


5 Treating “retainer fees” as “trust funds” and requiring the broker to maintain them in a trust account until contract consummation or termination protects the client’s money. Disbursing “retainer fees” for immediate use by the broker would jeopardize the availability of the funds at a later


date by making the funds susceptible to the following in the interim:


{a} If the broker files for bankruptcy, funds held in a trust account are not considered part of the broker’s personal estate to be paid to creditors by a bankruptcy trustee. This is not the case if the funds are in the broker’s operating account. There, the funds are not protected and could be obtained by a bankruptcy trustee.


{b} If the broker dies, has his or her real estate license revoked, becomes incapacitated, or is unable to perform brokerage activity on behalf of the client, funds maintained in a trust account are available for the benefit of the client.


{c} If a civil judgment is obtained against the broker, funds maintained in a trust account are not subject to attachment or garnishment by the plaintiff in the lawsuit.


{d} If the broker refuses to perform brokerage activities on behalf of his client, then the funds should still be available for return to the client if heldin a trust account and the client is protected from the broker’s nonperformance. If a “retainer fee” is disbursed immediately to the broker and spentby the broker as part of a real estate commission, then the client is “out of luck” and the broker would be compensated without having performed.


In conclusion, “retainer fees” should be treated as “trust


funds” and not disbursed immediately to the broker for per- sonal use, but maintained by the broker in the broker’s trust account until the closing of the transaction or upon con- tract termination. This protects the client and “protects the public.”


The administrative law judge agreed with the Commis- sion’s argument and sanctioned the Respondent. After the Commission’s review, which affirmed the judge’s decision but lowered the sanction, the Respondent filed an appeal in Fulton County Superior Court arguing that “Retainer Fees” are not “trust funds.” On December 8, 2016, the Judge in the Superior Court case upheld the Decision of the Commission.


WILLIAM L. ROGERS, JR., SERVED AS THE GEORGIA REAL ESTATE COMMISSIONER FROM 2011 UNTIL HIS RETIREMENT ON DECEMBER 31, 2016. VISIT THE GEORGIA REAL ESTATE COMMISSION’S WEBSITE AT WWW.GREC.STATE.GA.US/.


GEORGIA REALTOR® I 31


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