Broker James in Massachusetts represents the seller in a transaction. The buyer's agent delivers a $20,000 earnest money deposit check made payable to James's brokerage. The purchase and sale agreement specifies that James's brokerage will serve as escrow agent. James deposits the check into his trust account. Three weeks later, the buyer claims the seller breached the contract and demands the deposit back; the seller disputes this claim. The buyer's attorney sends James a letter demanding immediate release of the funds. What must James do?
Correct Answer
D) Continue to hold the funds in trust and refuse to release them to either party until there is a written agreement between the parties or a court order
Under Massachusetts Board regulations (254 CMR 3.00) and established escrow law, when a dispute arises over entitlement to escrow funds, the escrow agent (the broker) must continue to hold the funds in trust and refuse disbursement to either party until the dispute is resolved by written agreement of all parties or by court order. An attorney's demand letter alone does not authorize disbursement. Releasing funds prematurely exposes the broker to liability to the party who was entitled to them.
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Related Topics & Key Terms
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Related Concepts
Brokers in Florida have strict responsibilities for managing escrow accounts, including monthly reconciliation and proper handling of trust funds.
FREC has the authority to impose fines and other disciplinary actions on licensees who violate real estate laws and rules.
A group boycott is an illegal antitrust practice in which two or more competing real estate businesses agree to refuse to work with a specific person, company, or entity in order to harm that party's ability to compete.
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