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Legal IssuesWhen a transaction is derailed, what happens to the deposit?
Assume a transaction is derailed before settlement. Each side blames the other, but the seller who is primarily interested in getting the property back on the market and sold tells you to return the nominal deposit to the buyer. The buyer is hardly mollified: yeah, she’ll take the money, but also wants to sue the seller for everything he’s worth. When she reviews the release, already bearing the seller’s signature, she realizes that by signing it, she waives her right to sue the seller. She refuses to sign the release.
What can you do with the deposit?
Rule 35.321 of the Real Estate Commission provides that deposit money must be maintained in an escrow account until settlement or “a termination that does not involve a dispute.” Here there may be a dispute, but certainly not as far as the deposit is concerned.
If the seller signs away his right to claim it, in writing, can you give the money to the buyer? The buyer can still sue, but you have not prejudiced either side by taking action adverse to either side. In most cases we see little risk in this approach, provided there is adequate documentation such as a letter of explanation to the seller advising that the buyer may seek legal recourse even though the seller has released the money. Certainly it cannot be said that a dispute exists with respect to the deposit.
What do you think?
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Jim Goldsmith, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. |
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