Wednesday, August 27, 2014
By Heather Salvatoriello
Escrow disputes are an unfortunate reality of the real estate business. Whenever a contract is cancelled there is an opportunity for dispute and, as a result, the real estate agent must be prepared to respond in accordance with any and all applicable administrative codes, regulations, or statutes that apply. There are several key factors that will dictate the appropriate action to be taken; this is primarily determined by the holder of the funds. Real estate brokers and title companies are not governed in the same manner with regard to escrow disputes, which often results in the necessity of the real estate agent being responsible for directing the proper course of action.
When escrow funds are held by a real estate broker, disputes that arise can be sent to the Florida Real Estate Commission (FREC) or an interpleader lawsuit can be filed. Once notified, FREC makes a decision and issues an escrow disbursement letter detailing distribution of the funds. When an interpleader lawsuit is filed, the dispute is resolved by the courts.
Title companies are not regulated by FREC, and as such are given more latitude with regard to escrow disputes including, but not limited to: arbitration, mediation, or escheating the funds to the state. While a title company has a multitude of options at its disposal, the most common resolution is to refer the issue to the state where it is handled by the courts.
In an effort to mitigate their risk, real estate agents must be aware of the differences that exist between real estate brokers and title companies with regard to their dispute resolution strategies. One way in which an agent can limit their liability is to obtain and provide to their client a copy of the escrow holder’s dispute resolution policy at the time of escrow deposit. An escrow dispute is an unforeseen event that can be mitigated by clearly communicating what course of action will be followed if such an event arises. Furthermore, a clearly and concisely written contract that addresses all reasonable contingencies will provide the framework for whatever entity to determine the appropriate distribution of funds from an escrow dispute.
Heather Salvatoriello, Quality Title & Escrow, LLC, is a member of the ORRA Risk Management Subcommittee.
ORRA frequently schedules classes, workshops, and online offerings related to risk management. Check the ORRA Calendar often, as new classes are continually being added to the education lineup.