Re: escrow deposit dispute - Posted by JPiper
Posted by JPiper on April 09, 2000 at 16:40:35:
There are a lot of unanswered questions that arise from your post. So by necessity, this will have to be a general answer.
First, the contract controls the disposition of earnest money. None of us here have the benefit of seeing that contract. Chances are there is an earnest money clause that may refer to the disposition of earnest money in various circumstances. You might also want to check the default provisions of the contract to see whether when you terminated the contract you did so within the manner specified in the contract.
Another important question is where is the earnest money? Is the earnest money currently held in a broker trust/escrow account? A title company account? Or did you give the seller the earnest money directly?
Regardless, the chances are high that the Florida REC does not handle contractual disputes concerning earnest money. (I?m not familiar with Florida real estate law, but this would be very unlikely). The REC would typically handle licensee infractions concerning earnest money deposits?.but not contractual disputes between buyer and seller.
So the way I would handle this is to make a formal written demand for the earnest money addressed to the party that is holding the earnest money. If your contract provides for a different method then follow that?but chances are that this is the required first step. If the party holding the money is a broker or title company then typically they will require a formal written release to be executed by both seller and buyer, a release which would release both the property and the earnest money. If both parties do not, or will not, execute such an agreement, the title company or broker will probably hold the earnest money in accordance with the contract until there is an agreement or a court ruling or arbitration ruling providing for the disposition.
If the seller is currently holding the money, then obviously the money is being held without the benefit of rules that would typically control trust accounts. This is a no-no?.and hopefully you did not give the seller the money directly.
If your formal written demand does not produce results?.recording a memorandum will cloud the title. However, don?t assume this is foolproof. Properties get sold despite have recorded memorandums. In one county I deal in, for example, last minute recordings many times aren?t picked up by the title company because of the backup at the county courthouse.
Probably a more direct approach is to file a lawsuit and record a lis pendens. The result of this is that the property will be tied up until the lawsuit has been dealt with. The threat of this will many times serve to force the seller into an agreement about the earnest money. If you have to actually file a suit though, an attorney will be required, and therefore you will incur a cost. You might want to weigh these costs versus the amount of earnest money at stake. An attorney should be able to file a ?bare bones? suit somewhat inexpensively. Recording a lis pendens is cheap.
When I get involved in a dispute, my general reaction is to tell the other party what I intend to do, and what impact that is going to have on their situation. I do this in great detail. If necessary, I follow this up with a letter from my attorney?letters are cheap too. Normally this is enough to produce results?.but not always. When you reach this point, you sit down with a pencil and figure out whether it?s worth pursuing legally. Many times it isn?t. Throwing good money after bad normally doesn?t make sense, all other things being equal.
A good rule of thumb regarding earnest money is to never put up money you can?t walk away from. Keep it small?.or put it up in stages as you complete parts of your due diligence.