Expert: Todd C. Menard - 3/22/2009

Question
QUESTION: I am a Fl. resident with a signed sales contract for my home. This is a failed cash transaction where buyer has failed to perform after several ammended closing dates. My broker tells me that buyer is in default and I am entittled to the 5% deposit held in escrow with the title co. The title co. tells me that the deposit cannot be released without buyer's authorization. How long can the funds be held if the buyer does not respond to our demands for disbursment of deposit.


ANSWER: Hello Harold - There are a number of issues to this seemingly simple questions. What does the contract say the terms of breach or failure to close are? Does this breach provide for unilateral cancellation by the seller? Is the closing date a material breach of the contract? Is the title company actually looking for something in writing from the buyer/buyers agent indicating the buyer cannot perform? They may be waiting to get something from the buyer or buyers agent supporting the failure to perform... and then will act according to the contract terms, if so stated. Or, if the contract indicates the closing date is a material fact then title should not need anything other than the close date to pass. Another issue may if the contract requires the non-defaulting party to 'notice' the defaulting party to cure the potential breach within a certain time frame... then if the default is not cured within this time it would then be a breach. Finally, it also depends on whether your contract will be used a s escrow instructions or separate escrow instruction were issued. Tough to say without knowing more about the FL contract. This could just be a situation where you or your agent needs to seek to understand why the title company needs additional information. Title companies, like all of us, are not always correct in their interpretation of the contract terms either. I recommend contacting your agents designated broker and request he/she intervene and talk to title to understand more fully why and under what condition will they release the earnest money to you. I am not aware of a statute of limitations on how long they can hold the earnest money but if there is a discrepancy between two parties to a contract what happens to the earnest money title usually will hold the deposit indefinitely until the parties agree. My area of expertise from a contractual standpoint is Arizona but the information I provided is applicable regardless. Your agents broker will be fluent in the statutes, codes and procedures in your state. Basically, the ball is in your broker's court. They should be professional and skilled enough to navigate you through this. You certainly aren't the only client that has had a cash buyer not perform!  Failure to properly represent you in this may mean your broker is in violation of Article 1 of the National Association of REALTORS Code of Ethics.. "Failing to keep your clients best interest at all times".. this means by actions as well as words.. Is you agent experienced? If you need further information please do not hesitate to reply. - Todd

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QUESTION: Hello Todd-Contract For Sales And Purchase Florida association of realtors and the Florida Bar- # 244 "Fialure of Performance: if buyer fails to perform this contract within the time specified,including payment of all deposits,the deposits paid by buyer and the deposits agreed to be paid,may be recovered and retained by and for the account of seller as agreed upon liquidated damages,consideation for the execution of this contract and in full settlement of any claims; whereupon ,buyer and seller shall be relieved of all obligations under this contract; or seller at seller's option ,may proceed in equity to enforce seller's rights under this contract. if for any reason other than failure of seller to make the seller's title marketable after dilligent effort, seler fails, neglect or refuses to perform this contract, buyer may seek specific performance or elect to receive the return of buyer's deposits without therby waiving any action for damages resulting from seller's breach: When the first closing date passed an addendum to extend the closing date was signed along with a promise by buyer to send an additioal 5% deposit that was not received. when this closing date passed and additional deposit not received We feel the contract has breached being the material facts. all the title co. requires is the buyer's signature on the release of deosit receipt however buyer has not responded to our demands.
         Thank again for your help
         Harold

Answer
Hello Harold - Remembering I am not an attorney, this language would indicate that the buyers failure to provide the funds along with failure to perform would constitute a breach. What it doesn't say however, is the procedure that needs to be followed to enact collect the deposit as your sole right to remedy. I cant imagine that a breaching party would desire to sign anything if they knew that the signature would release their funds to the other party adding salt to the wound. Once again, I believe the title company needs some proof/document form the buyer indicating the buyer cannot perform. The buyers broker should be the party responsible for getting this signed and sending it to the seller/sellers agent. I would imagine that to enforce this there must have been some duty on the part of the non-breaching party to notice the breaching party that if they don't perform within so many days (Addt'l deposits or close) then they will be in breach and lose their deposit(s). Send the document to the breaching party or their agent and also to the title company documenting the purported breach as well as set the time-clock ticking... failing to notice the breaching party may be deemed that you are not enforcing a portion in the terms and until noticed the non-breaching party is not able to take the deposit as remedy. You should call title yourself and ask whether their was a notice procedure that would eliminate the need for the buyers signature... the buyer signed the contract and addendum, which was the buyers agreement to be held accountable to the terms therein... of course, following the appropriate local practices and procedures conforming to law.