A Connecticut real estate broker holds a $25,000 earnest money deposit in her trust account. The transaction fell through and the buyer and seller both claim the deposit. The seller claims the buyer defaulted; the buyer claims the seller breached. The broker cannot determine who is entitled to the funds. Under Connecticut law, what is the broker's most appropriate course of action?
Correct Answer
C) Continue to hold the funds in the trust account and seek a written release from both parties or await a court order directing disbursement
Under Connecticut law, a broker who holds disputed earnest money in a trust account must not release the funds unilaterally to either party. The appropriate course is to continue holding the funds in the trust account and either obtain a written release agreement signed by both the buyer and seller, or await a court order directing disbursement. This protects the broker from liability and ensures compliance with Connecticut trust account obligations under CGS Chapter 392.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
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