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Legal FAQ's

Q: In a short sale transaction, the parties used CR-2 Addendum G, Short Sale Approval Contingency. The contract expiration date described in Section 4 of this addendum passed and the seller never gave the buyer notice of short sale approval. Under these circumstances, Section 4 provides that “the deposit shall be refunded to buyer.” Why is the title company holding the deposit requiring a fully executed release and cancellation before giving the deposit to the buyer?

A: More than likely, this is based on the title company’s internal policy not to release escrowed funds unless it receives a release and cancellation signed by both buyer and seller. This is not related to the terms of the contract between buyer and seller. Although this is a common policy, either party may ask the title company if there are other circumstances under which it would be willing to disburse the deposit.  

Q: An unlicensed investor asked me to be the qualifying broker of his newly formed corporation, which he hopes to license as a real estate company. He is a savvy businessperson, and he and I are negotiating the terms of our agreement. He is proposing that he be the only authorized signatory on the operating account, although I will be a signatory on the escrow account. He assures me that I will be able to review the books at any time. Don’t I, as the broker, have to be a signatory on the company operating account?

A: No. Although Rule 61J2-14.010(1), Florida Administrative Code, provides that at least one broker must be a signatory on all escrow accounts, Florida Real Estate Commission (FREC) does not have a parallel rule about operating accounts.

Q: I’m a broker associate, and I have a buyer who may make an offer on a residential single-family home by the end of the month.  The buyer wants the earnest money deposit to be held in my real estate brokerage company escrow account.  Although the buyer has recently handed over the physical check for the earnest money, he’s asked me to hold the check (not deposit it) until he actually makes an offer on the property.  May I wait until the offer has been made to deposit the earnest money check? 

A: No. Rule 61J2-14.009, Florida Administrative Code (FAC), provides that any associate or broker associate must deliver the escrow deposit “to the broker or employer no later than the end of the next business day following receipt of the item to be deposited.” Then, the broker must comply with Rule 61J2-14.010(1), FAC, which requires the broker to immediately deposit the escrow funds in the escrow account.  Immediately is defined in Rule 61J2- 14.008(3), FAC, as “…the placement of a deposit in an escrow account no later than the end of the third business day following receipt of the item to be deposited.  Saturdays, Sundays and legal holidays shall not be considered as business days.” 

Q: I’m a broker and have chosen not to have an escrow account.  What are the rules for depositing escrow? 

A: Under Chapter 61J2-14.010,Florida Administrative Code, and Section 475.25(1)(k), Florida Statutes, the rules are the same whether or not you personally have an escrow account. If a broker has received funds, or any item of value, from any person interested in a real estate transaction, the money or item of value must be placed immediately into a bank, credit union, title company or into any insured escrow or trust account. Immediately is defined as placement of a deposit in a trust account no later than the end of the third business day following receipt of the item to be deposited. Weekend days and holidays are not considered to be business days. Receipt by a sales associate or any other representative of the brokerage constitutes receipt by the broker for this purpose. 

Q: I’m a broker currently performing the monthly reconciliation statement for my real estate brokerage’s escrow account. Is there a legally required form that must be used? 

A: No. However, Rule 61J2-14.012(2), Florida Administrative Code, outlines the specific information that the monthly reconciliation statement must contain:
• The date the reconciliation was undertaken;
• The date used to reconcile the balances;
• The name(s) of the bank(s);
• The name(s) of the account(s);
• The account number(s), account balance(s) and the date(s);
• Deposits in transit;
• Outstanding checks identified by date and check number;
• An itemized list of the broker’s trust liability; and
•Any other items necessary to reconcile the bank account balance with the balance per the broker’s checkbook and other trust account books and records disclosing the date of receipt and the source of the funds.

The broker is required to review, sign and date the monthly reconciliation statement.

To provide help in preparing the monthly reconciliation statement, Florida Realtors® provides its members with forms they may use: “Monthly Reconciliation Statement Real Estate Trust Account” (MSR-5) and “Monthly Reconciliation Statement Real Estate Trust Account Addendum” (MSRA-1). These forms are available through the Form Simplicity™ document management system. 

Q: The seller walked away from a purchase and sale contract three days before closing. The buyer presented a release and cancellation, but the seller refused to sign, claiming entitlement to the deposit, which was being held by a local title company. Who notifies the Florida Real Estate Commission (FREC) of the escrow dispute? 

A: In this instance, no one would be notifying FREC. Section 61J2-10.032(1)(a), Florida Administrative Code, requires a real estate broker to notify FREC within 15 business days after receiving conflicting demands on trust funds maintained in the broker’s account, but this provision does not apply to title companies.

In most cases, a title company will require clear written instructions from both parties before releasing the deposit.  If the parties can’t provide matching instructions within a reasonable period, the title company will likely deposit the funds with the local clerk of courts, and either party may then file a court case to argue why they believe they’re entitled to the deposit. 

Q: I suspect a licensed real estate broker is stealing money from the brokerage escrow account.  What can be done about this? 

A: You should immediately report this to the Department of Business and Professional Regulation (DBPR). The DBPR has the ability, under Section 475.5017, Florida Statues, to go to circuit court for immediate injunctive relief.  Appropriate civil action may be brought by the DBPR in circuit court as well. In any such action, an order or judgment may be entered awarding whatever temporary or permanent injunction is deemed proper.  

In addition, the court shall have power and jurisdiction to impound and appoint one or more receivers for the property and business of the broker, including books, papers, documents, and records pertaining to them or to whatever the court may deem reasonably necessary to prevent violations of the law or injury to the public.


Q: I’m a new broker and would like to start my own real estate brokerage. I’d like to have a title company maintain all the escrow funds. Is a real estate brokerage company required to have an escrow account? 

A: No. There is no legal requirement for a real estate brokerage company to have an escrow account if the brokerage is not maintaining any escrow funds. 

Q: I represent the buyer. The transaction failed, and the seller refuses to release the escrow deposit to my buyer. The seller put the property back on the market. Is the seller permitted to advertise and sell the property when there’s a pending escrow dispute? 

A: Yes. An escrow dispute, in itself, does not prevent the seller from advertising or selling the property. 

Q: I represent a prospective buyer. The seller is demanding that his attorney be the escrow agent. May the seller make such a demand? 

A: Like any other contract term or condition, the choice of an escrow agent is a negotiable item between the parties. 

Q: May the seller and buyer agree that the seller will hold the buyer’s earnest money deposit? 

A: Yes. The escrow holder is negotiable between the parties. 

Q: May a real estate broker place an escrow deposit for the sale and purchase of real property in an interest-bearing escrow account? 

A: Rule 61J2-14.014, FAC, allows a broker to place escrow funds in an interest-bearing account, but only with the written permission of the parties to the sale and purchase transaction.
The written permission must specify the party to receive the interest and the time when the earned interest must be disbursed. Additionally, the funds must be maintained in an insured depository (i.e., Florida banking institution) located in the state of Florida. 

Q: I’m a broker who holds escrow, and I currently have an escrow dispute over a $100,000 deposit. Will FREC issue an Escrow Disbursement Order for this amount? 

A: No. FREC won’t issue EDOs for amounts that exceed $50,000. If your disputed amount exceeds $50,000, you should interplead the funds. Or, with the parties’ consent, you could also submit the matter to either mediation or arbitration. 

Q: As the broker for a large real estate office, I maintain an escrow account at a local bank. Now that I have fewer sales associates, I do more sales and want to hire an accountant to prepare my monthly reconciliation statement. May someone other than the broker prepare this reconciliation statement? 

A: Yes. Rule 61J2-14.012, Florida Administrative Code, requires that the broker cause, once monthly, the reconciliation statement to be made. The accountant may prepare the actual statement, but pursuant to rule 14.012 the broker is still required to review, sign and date the monthly reconciliation statement. Additionally, the broker is ultimately responsible for the funds in escrow. 

Q: I’m a broker who wants to be a property manager; however, I neither have an escrow account nor want one. The landlord will hold the security deposit and last month’s rent in his escrow account. I plan to collect the rent checks, deposit them into my brokerage operating account, deduct my commission and then write a check to the landlord for the balance. Is this acceptable? 

A: No. If you collect rent on behalf of the landlord and the rent payment is payable to your brokerage, you must first deposit those checks into your escrow account.  Generally, upon these funds clearing and with the permission of the landlord, you could then deduct your commission and transfer that amount to your operating account. 

Q: I’m a broker with a listing for a home that has a lawn and a pool. The owner went overseas, but he gave me money to hire a lawn maintenance company and a pool cleaning service while he is away. Should I put this money in my escrow account? 

A: Yes. Whenever you receive funds in connection with a real estate transaction belonging to someone else you must deposit and hold the money in an escrow account until you have proper authorization from the owner for release. 

Q: I’m a broker/owner of a real estate brokerage corporation. My company maintains several escrow accounts. A friend, who is also a broker, indicated that I’m required to send the monthly escrow reconciliation statements to FREC. Am I required to do so? 

A: No. There is no requirement to send FREC the monthly escrow reconciliation statements. Rule 61J2-14.012, Florida Administrative Code, requires that each escrow account be reconciled in writing at least once monthly but does not state that those monthly escrow reconciliation statements must be sent to FREC. 

Q: I’m a transaction broker for a buyer who entered into a contract with a seller. The buyer delivered an escrow check to me, signed by the buyer’s boyfriend, which was deposited into my firm’s escrow account. The buyer defaulted on the contract and agreed that the seller should retain the deposit; however, the buyer’s boyfriend is demanding that we return the deposit to him since he wrote the check. To whom should my brokerage firm disburse the deposit? 

A: The seller. Unless the boyfriend was a party to the contract, you should disburse the escrow according to the parties’ (i.e., the girlfriend and the seller) instructions. Additionally, if a non-party is putting the deposit down, your brokerage should consider an office policy to disclose this to the non-party, in this case, the boyfriend.

Q: I represent a seller who entered into a contract for sale/purchase with a buyer about a month ago. The contract just fell through and both the seller and the buyer have placed demands on the earnest money deposit, which is being held in escrow by the title company. I don’t maintain an escrow account. Since I’m not holding the funds in escrow, do I have to notify the Florida Real Estate Commission (FREC) of the dispute? 

A: No. You don’t have an obligation to notify FREC of such a dispute since you aren’t holding the funds in escrow. Additionally, FREC doesn’t regulate title companies and thus has no authority to dictate what the title company does with the funds. A title company faced with conflicting demands as described above is likely to maintain the funds in escrow until the buyer and seller resolve their dispute or file an interpleader action.

Q: May the broker be designated by the parties to receive the interest on the escrow deposit for the sale and purchase of real property? 

A: Yes. However, the broker must follow precisely one of the two approved disbursement procedures provided for in Rule 61J2-14.014, FAC. 

Q: I’m a broker opening my own real estate office and setting up my escrow accounts. How much of my own money may I keep in my escrow accounts? 

A: A broker may place and maintain up to $5,000 of personal or broker funds in the broker’s property management escrow account and up to $1,000 of personal or brokerage funds in the broker’s sales escrow account. 

Q: I'm a broker who’s already requested an Escrow Disbursement Order (EDO) from the Florida Real Estate Commission (FREC). The seller is now suing the buyer for the money. What should I do? 

A: Notify FREC in writing. Rule 61J2-10.032(2)(c), Florida Administrative Code, provides that "if the broker has requested an EDO and the dispute is subsequently settled or goes to court before the order is issued, the broker shall notify FREC within 10 business days of such event."