A California broker is holding a disputed earnest money deposit in the brokerage trust account. The buyer and the seller each claim the funds, and the broker cannot determine who is entitled to them. Under California law, what is the broker's proper course of action?
Correct Answer
A) File an interpleader action, depositing the funds with the court so it can decide who is entitled to them
A broker holding trust funds that two parties claim may not decide the dispute; paying either claimant risks liability to the other and a trust-fund violation. The remedy is interpleader under Code of Civil Procedure §386: the broker deposits the disputed funds with the court, is discharged from further responsibility for them, and lets the court determine entitlement. Until that happens the money stays in the trust account, and it may be released without a court order only on the written instructions of both parties.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Fair housing laws apply to a broad range of activities related to housing, including sale, rental, financing, and advertising.
A seller's disclosure statement is a form that sellers complete to inform buyers about the condition and history of the property, including known defects, past repairs, insurance claims, and environmental issues.
Many states and localities have fair housing laws that expand upon the protections offered by the federal Fair Housing Act.
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