Real Estate Laws on Escrow Disputes in Florida

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Real estate brokers in Florida are charged with the duty of handling escrow funds used in real estate transactions. The broker must deposit the funds into an escrow account under his control and is responsible for the proper disbursement of the funds, regardless of whether the transaction related to the funds is completed. If a dispute arises regarding disbursement of the funds and the parties cannot agree on how to resolve it, the broker must either request a disbursement order from Florida's Division of Real Estate or file a lawsuit.

Florida Law

  • Florida Statute 475.25(1)(d) states that a real estate broker is subject to disciplinary action if he fails to properly account for or deliver escrow funds to a person legally entitled to demand the accounting and receive the funds. In situations where the broker receives conflicting demands for the funds, the broker is at risk of violating the statute if he acts on one of the demands that subsequently proves incorrect. To avoid this risk, the statute requires the broker to immediately notify the Department of Business & Professional Regulation of the dispute and specifies four options the broker can take in response to conflicting demands: mediation, arbitration, request for disbursement instructions, or filing a lawsuit.

Mediation and Arbitration

  • The broker may only use mediation or arbitration to resolve the dispute with the consent of the parties. A mediation of the dispute is conducted before the department or a private mediation service. The mediator's goal is to facilitate a voluntary resolution of the dispute between the parties. This must occur within 90 days of the last conflicting demand received by the broker. Arbitration is conducted by a private arbitration service that involves the parties presenting their respective positions to an agreed upon arbitrator, who will issue a decision deciding the dispute. The parties can agree to binding arbitration, in which case the arbitrator's decision is final, or nonbinding arbitration that gives either party the option of rejecting the decision and filing a lawsuit.

Request for Disbursement Instructions

  • If the parties do not consent to either mediation or arbitration, the broker can file a request for a disbursement order with the department's Division of Real Estate. The request is submitted on a form required by the division along with all documents related to the escrow, in particular the parties' signed instructions. After receiving the division's disbursement order, the broker can disburse the funds in accordance with the order without violating Florida law -- even if a court subsequently determines that the disbursement order was incorrect. The aggrieved party may pursue a claim against the department's Real Estate Recovery Fund up to $50,000.

Court Action

  • A civil lawsuit known as an "interpleader" can be filed by the broker in order to avoid incorrectly disbursing the escrow funds and violating Florida law. When the lawsuit is filed, the broker requests an order from the court directing him to deposit all of the escrow funds with the clerk of court. Once the funds are deposited, the court will dismiss the broker from the case with an order shielding him from any liability for the funds. The clerk will only disburse the funds as ordered by the court after the case is tried or otherwise settled between the parties.

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