A buyer deposits $10,000 in earnest money into escrow. After the transaction falls apart, the buyer and seller both submit conflicting written demands for the deposit. The escrow holder sends written notice to both parties advising them of the dispute. Under California Civil Code §1057.3, what is the escrow holder's obligation if the parties fail to resolve the dispute within the statutory waiting period?
Correct Answer
C) File an interpleader action and deposit the funds with the court for judicial determination
Under California Civil Code §1057.3, when an escrow holder receives conflicting written demands for a deposit, it must send written notice to all parties. If the dispute is not resolved within 30 days of that notice, the escrow holder is authorized to file an interpleader action, depositing the disputed funds with the court so a judge can determine the proper distribution. This protects the escrow holder from liability for unilaterally releasing funds to either party.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
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