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No deal: escrow rules to help ease the pain

Thursday, June 07, 2012  
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Make sure no one is left holding the case by following FREC's advice for requesting an escrow disbusement order

Remember the show "Deal or No Deal?" No one likes to see a deal go bad, but when it happens, it is vitally important that real estate professionals and the Florida Real Estate Commission cooperate to ensure that the matter is resolved professionally and expeditiously. To that end, FREC offers the following tips and reminders when requesting an escrow disbursement order:

*The qualifying broker is the key person – The rules require that the Notice of Conflicting Demands and the Request for Escrow Disbursement Order be submitted by the broker holding the escrow account; not the office manager or broker-associates who handles the purchase or sale. Inasmuch as the broker who qualifies the brokerage firm is the person ultimately responsible for the escrow account, it is that person who is relied upon to the request the escrow disbursement order and to provide the information needed to resolve the matter.

*The commission’s role – The commission arbitrates only those disputes involving earnest money deposits held by a real estate licensee. The commission does not have the legal power to order title companies, attorneys, or other escrow holders to disburse deposits.

*Neatness counts – In order to avoid unnecessary delay, FREC relies on the broker to submit accurate information on the Request for Escrow Disbursement Order. This includes the names and addresses of the parties to the contract, and legible copies of the contract and related documents.

*Avoid paper overload – there is no need to submit extra copies of the request form and supporting documents, or to fax the forms if the originals have been furnished by mail. Duplicate submission may result in duplicate files being created for the same dispute.

*Time is of the essence – The commission seeks to respond to Requests for Escrow Disbursement Orders in a timely manner. It is important to the process that all information relevant to the dispute be submitted within the time limits established by Florida Statute Section 475.25 (1) (d) 1 and by Florida Administrative Code Rule 61J2-10.032 (1). When submissions must be returned to the requesting broker for missing information or a missing signature, the whole process is delayed. When an old address for a party is provided, the delay caused by the mail forwarding process adds to the time required to process the dispute.

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*The new world of e-mail – When submitting printed copies of relevant e-mail correspondence, please do not print multiple copies of the same e-mail "trail.” However, please indicate who the parties to the e-mail are (often the name of the sender or receive is an e-mail name rather than the person’s proper name). FREC needs to know who said what to whom.

*Always be professional and courteous – A deal gone bad is stressful for everyone involved. Let the parties know you’ve asked FREC to help resolve the dispute.The best everyone can hope for is an objective resolution based on available facts and applicable law. It’s often hard not to choose sides in the debate, but it’s important to remember that each dispute has at least two sides and that all parties to the dispute are entitled to be heard and treated with courtesy and respect.

Section 475.25 (1) (d) 1, Florida Statutes

The commission may deny an application for licensure, registration, or permit, or renewal thereof: may place a licensee, registrant, or permitee on probation; may suspend a license, registration, or permit for a period not exceeding 10 years; may revoke a license, registration, or permit; may impose an administrative fine not to exceed $5,000 for each count or separate offense; and may issue a reprimand, and any or all of the forgoting, if it finds that the licensee, registrant, permitee, or applicant:

(d) 1. Has failed to account or deliver to any person, including a licensee under this chapter, at the time which has been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery, any personal property such as money, fund, deposit, check, draft, abstract of title, mortgage, conveyance, lease, or other document or thing of value, including a share of a real estate commission if a civil judgment relating to the practice of the licensee’s profession has been obtained against the licensee and said judgment has not been satisfied in accordance with the terms of the judgment within a reasonable time, or any secret or illegal profit, or any divisible share or portion thereof, which has come into the licensee’s hands and which is not the licensee’s property or which the licensee is not in law or equity entitled to retain under the circumstances. However, if the licensee, in good faith, entertains doubt as to what person is entitled to the accounting and delivery of the escrowed property, or if conflicting demands have been made upon the licensee for the escrowed property, which property she or he still maintains in her or his escrow or trust account, the licensee shall promptly notify the commission of such doubts or conflicting demands and shall promptly:

a. Request that the commission issue an escrow disbursement order determining who is entitled to the escrowed property;

b. With the consent of all parties, submit the matter to arbitration;

c. By interpleader or otherwise, seek adjudication of the matter by a court; or

d. With the written consent of all parties, submit the matter to mediation. The department may conduct mediation or may contract with public or private entities for mediation services. However, the mediation process must be successfully completed within 90 days following the last demand or the licensee shall promptly employ one of the other escape procedures contained in this section. Payment for mediation will be as agreed to in writing by the parties. The department may adopt rules to implement this section.

If the licensee promptly employs one of the escape procedures contained herein and abides by the order or judgment resulting therefrom, no administrative complaint may be filed against the licensee for failure to account for, deliver, or maintain the escrowed property. Under certain circumstances, which the commission shall set forth by rule, a licensee may disburse property from the licensee’s escrow account without notifying the commission or employing one of the procedures listed in sub-subparagraphs a.-d. If the buyer of a residential condominium unit delivers to a licensee written notice of the buyer’s intent to cancel the contract for sale and purchase, as authorized by s. 718.503, or if the buyer of real property in good faith fails to satisfy the terms in the financing clause of a contract for sale and purchase, the licensee may return the escrowed property to the purchaser without notifying the commission or initiating any of the procedures listed in sub-subparagraphs a.-d.

Rule 61J2-10.032 (1), Florida Administrative Code: Notice Requirements

(1)(a) A real estate broker, upon receiving conflicting demands for any trust funds being maintained in the broker’s escrow account, must provide written notification to the Commission within 15 business days of the last party’s demand and the broker must institute one of the settlement procedures as set forth in Section 475.25(1)(d)1., Florida Statutes, within 30 business days after the last demand.

(b) A broker, who has a good faith doubt as to whom is entitled to any trust funds held in the broker’s escrow account, must provide written notification to the Commission within 15 business days after having such doubt and must institute one of the settlement procedures as set forth in Section 475.25(1)(d)1., Florida Statutes, within 30 business days after having such doubt. The determination of good faith doubt is based upon the facts of each case brought before the Commission.

(c) If one of the parties to a failed real estate sales transaction does not respond to the broker’s inquiry as to whether that party is placing a demand on the trust funds or is willing to release them to the other party, the broker may send a certified notice letter, return receipt requested, to the non-responding party. This notice should include the information that a demand has been placed by the other party, that a response must be received by a certain date, and that failure to respond will be construed as authorization for the broker to release the funds to the other party.

(2)(a) If the broker has instituted a settlement procedure other than a request for an Escrow Disbursement Order, the broker shall provide written notification to the Commission within 30 business days of the receipt of the last demand or good faith doubt of the procedure instituted to resolve the matter.

(b) If the broker has requested an Escrow Disbursement Order and the broker is notified in writing that no Escrow Disbursement Order will be issued, then the broker shall institute another settlement procedure and so notify the Commission within 30 business days after the broker’s receipt of such notification.

(c) If the broker has requested an Escrow Disbursement Order and the dispute is subsequently settled or goes to court before the Order is issued, the broker shall notify the Commission within 10 business days of such event.

(3) For purposes of this rule, where a broker is required to provide written notification within a certain period, the effective date of that notification is deemed to be the date of the postmark or other dispatch of notification. A request for an Escrow Disbursement Order as a settlement procedure is deemed instituted when the completed request form is mailed or otherwise dispatched to the Commission.(4) Brokers who are entrusted with an earnest money deposit (EMD), pursuant to a residential sales contract utilized by the Department of Housing and Urban Development (HUD) in the sale of property owned by HUD, are not required to follow the notice or settlement procedures of Section 475.25(1)(d)1., Florida Statutes, and subsection (1) of this rule. The broker is to follow HUD’s Agreement to Abide, Broker Participation Requirements, and 24 C.F.R. s. 291.135 as they pertain to the proper disposition of EMDs.

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