Humber/Ontario Real Estate Course 4 Exam Practice

Which statement is true regarding brokerages with commission trust accounts and real estate trust accounts?

1. Funds in the real estate trust account that exceed earned remuneration must be transferred to the commission trust account

2. Brokerages are required by REBBA to maintain both accounts

3. The real estate trust account is mandatory, but the commission trust account is not required under REBBA

4. Disbursements from the commission trust account should prioritize the listing brokerage

5. Brokerages must establish and maintain commission trust accounts for all transactions

6. Real estate trust accounts must be included in all brokerages’ financial statements

The correct answer is: The real estate trust account is mandatory, but the commission trust account is not required under REBBA

The statement that the real estate trust account is mandatory, while the commission trust account is not required under REBBA, is accurate. In real estate, the real estate trust account is specifically used to hold funds that belong to clients, such as deposits made by buyers, until a transaction is completed. This account is governed by strict regulations to ensure that client funds are protected and handled appropriately. On the other hand, a commission trust account, while beneficial for managing income from commissions, is not mandated by the Real Estate and Business Brokers Act (REBBA). Brokerages have the discretion to establish a commission trust account based on their business practices, but it is not a regulatory requirement. This distinction clarifies that there must be a real estate trust account for the proper handling of client funds, but the commission trust account exists solely for the benefit of the brokerage's operational convenience and is not a necessity under the law. Understanding these roles helps real estate professionals comply with regulatory requirements and safeguards the financial interests of their clients.