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Escrow dispute? This could cost your clients money

 

March 20, 2017 – As every Realtor knows, an entity holding a buyer's deposit escrow – a real estate broker, title company, attorney or someone else – must release the money if a transaction fails. However, that release isn't always easy. At times there are conflicting demands, and sometimes the escrow holder can't determine whether both parties agree on a method for releasing the deposit.

In cases like this, the escrow holder might decide to turn the dispute over to a civil court in what's called an "interpleader action." If the court accepts an interpleader action, the escrow holder may then deposit the escrowed property with the court and be dismissed from a lawsuit.

The interpleader action essentially forces the seller and buyer to make their case to a court, and the court then decides who is entitled to the deposit.

An interpleader action has a built-in disadvantage though: The escrow holder incurs attorneys' fees and costs. To avoid the fees and costs, however, an escrow holder's attorney usually asks the court to cover those fees with money in the escrow fund, and the court will often do so.

Should the court grant a request for reimbursement using the escrow funds, it's important to understand that the total amount of the deposit available to the parties could be reduced – sometimes significantly.

Both the Florida Realtors/Florida Bar contract forms and the Florida Realtors CRSP contract form contain provisions that address the escrow agent's rights when interpleading escrowed money or property.

© 2017 Florida Realtors

 

Related Topics: Florida Realtors Legal News