Q: A new broker and wants to start his own real estate brokerage and would like to have a title company maintain all the escrow funds. Is a real estate brokerage company required to have an escrow account?
A: No. There is no legal requirement for a real estate brokerage company to have an escrow account if the brokerage is not maintaining any escrow funds.
Q: If a broker is providing property management services to a landlord, does the broker have to hold the security deposit or advanced rents in escrow?
A: No. Pursuant to Sections 83.49(1)(a) and (b), Florida Statutes, the landlord has the responsibility to hold the security deposit and advanced rents in a non-interest-bearing or interest-bearing account in a Florida banking institution. The broker doesn’t have to hold this money unless the broker and landlord agree that the broker will do so, pursuant to a Property Management Agreement. Further, the escrow agent, the holder of the security deposits and advanced rents, should be designated in the lease between the landlord and the tenant.
Q: A seller is demanding that his attorney be the escrow agent. May the seller make such a demand?
A: Like any other contract term or condition, the choice of an escrow agent is a negotiable item between the parties.
Q: An agent represents the buyer. The transaction failed, and the seller refuses to release the escrow deposit to the buyer. The seller put the property back on the market. Is the seller permitted to advertise and sell the property when there’s a pending escrow dispute?
A: Yes. An escrow dispute, in itself, does not prevent the seller from advertising or selling the property.
Q: A broker and handles property management for landlords and wants to maintain $500 of personal funds in the property management escrow account. Is this allowed?
A: Yes. Rule 61J2-14.010(2), Florida Administrative Code, allows a broker to place and maintain up to $5,000 of personal or brokerage funds in each property management escrow account. However, a broker may place and maintain only up to $1,000 of personal or brokerage funds in each sales escrow account.
Q: May the seller and buyer agree that the seller will hold the buyer’s earnest money deposit?
A: Yes. The escrow holder is negotiable between the parties.
Q: A broker wants to provide property management services to a landlord. Must the broker have an escrow account?
A: No. The landlord may hold the advanced rent and the security deposit (Section 83.49, Florida Statutes).
Q: A broker has already requested an Escrow Disbursement Order from the Florida Real Estate Commission. The seller is now suing the buyer for the money. What should the broker do?
A: Notify FREC in writing. Rule 61J2-10.032(2)(c), Florida Administrative Code, provides that “if the broker has requested an EDO and the dispute is subsequently settled or goes to court before the order is issued, the broker shall notify FREC within 10 business days of such event.”
Q: A broker represents a seller who entered into a contract for sale/purchase with a buyer about a month ago. The contract just fell through and both the seller and the buyer have placed demands on the earnest money deposit, which is being held in escrow by the title company. The brojer doesn’t maintain an escrow account. Since he’s not holding the funds in escrow, does he have to notify the Florida Real Estate Commission of the dispute?
A: No. The broker doesn’t have an obligation to notify FREC of such a dispute since he isn’t holding the funds in escrow. Additionally, FREC doesn’t regulate title companies and thus has no authority to dictate what the title company does with the funds. A title company faced with conflicting demands as described above is likely to maintain the funds in escrow until the buyer and seller resolve their dispute or file an interpleader action.
Q: A transaction broker for a buyer enters into a contract with a seller. The buyer delivers an escrow check, signed by the buyer’s boyfriend, which was deposited into the broker’s firm’s escrow account. The buyer defaulted on the contract and agreed that the seller should retain the deposit; however, the buyer’s boyfriend is demanding that the firm return the deposit to him since he wrote the check. To whom should the brokerage firm disburse the deposit?
A: The seller. Unless the boyfriend was a party to the contract, you should disburse the escrow according to the parties’ (i.e., the girlfriend and the seller) instructions.