Broker James in Connecticut receives an earnest money deposit from a buyer. The purchase contract falls through due to a dispute between the buyer and seller, and both parties are claiming the deposit. Under Connecticut law, what is the broker's most appropriate course of action?
Correct Answer
C) James should retain the funds in the escrow account and may seek a court interpleader action or follow CREC guidance to resolve the dispute.
Under Connecticut license law and CREC regulations, when there is a bona fide dispute over earnest money, the broker must not unilaterally release the funds to either party. The appropriate action is to retain the funds in the escrow account and either seek a court interpleader action — which asks the court to determine who is entitled to the funds — or follow CREC's guidance on dispute resolution. Unilateral release to either party without authorization exposes the broker to liability and potential license discipline.
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Related Topics & Key Terms
Key Terms:
Related Concepts
License requirements are the mandatory qualifications—including pre-licensing education, examination, and background checks—that a person must satisfy before legally practicing real estate. These requirements are established and enforced by each state's real estate commission.
Market allocation is an illegal antitrust practice in which competing real estate brokerages agree to divide markets among themselves by geographic area, property type, or price range, thereby eliminating competition.
Price fixing is an illegal antitrust practice in which competing real estate brokerages agree to charge the same commission rates, fees, or other pricing for their services. It is a per se violation of the Sherman Antitrust Act.
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