Broker James holds $8,000 in earnest money in his trust account for a transaction that fell through due to a contract dispute. The buyer demands return of the full $8,000, but the seller claims $3,000 as a liquidated damages forfeiture. James is uncertain about the correct disbursement. Under Connecticut law, what is the most appropriate action for James to take?
Correct Answer
C) James should retain the disputed funds in the trust account and seek written agreement from all parties or obtain a court order before disbursing
Under CGS § 20-324e and CREC regulations, when there is a bona fide dispute over the disbursement of trust funds, the broker must retain the funds in the trust account until the dispute is resolved. Resolution may come through written agreement signed by all parties or through a court order directing disbursement. A broker who unilaterally disburses disputed funds risks disciplinary action, civil liability, and potential criminal charges.
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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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