In many Florida real estate transactions, a portion of the seller's proceeds may be held in escrow after closing. These funds are commonly retained to address post-occupancy agreements, unresolved permit issues, code violations, repairs, or other obligations that remain outstanding after the transfer of ownership.
But what happens when the funds remain unclaimed or the parties cannot agree on their release?
Escrow Funds Are Held Pursuant to the Escrow Agreement
A title company acts as a neutral escrow agent and can only disburse funds according to the terms of the escrow agreement signed by the parties. The agreement typically outlines the conditions that must be satisfied before the funds can be released.
Examples include:
Completion of agreed-upon repairs
Resolution of open permits
Correction of code violations
Compliance with a post-occupancy agreement
When the Parties Cannot Reach Agreement
Occasionally, disputes arise regarding whether the escrow conditions have been satisfied. If the parties cannot agree on how the funds should be distributed, the title company cannot simply decide who is entitled to the money.
In these situations, the escrow agent may initiate an interpleader action, depositing the disputed funds with the court. Once the funds are deposited, the court assumes responsibility for resolving the dispute between the parties.
Costs Associated with Interpleader Action
It is important for parties to understand that an interpleader action involves costs. The title company or escrow agent typically incurs attorney's fees and court costs in preparing and filing the action. In many cases, the court may permit the escrow agent to recover reasonable attorney's fees and costs from the escrowed funds before the remaining balance is distributed to the prevailing party or parties.
As a result, prolonged disputes over escrow funds can reduce the amount ultimately available for distribution. For this reason, parties are often encouraged to resolve escrow disputes through negotiation whenever possible, rather than allowing the matter to proceed to litigation.
Florida's Unclaimed Property Laws
Not all escrow funds become the subject of litigation. Sometimes funds remain dormant because a party cannot be located or fails to claim the money. For example, escrow balances may consist of holdback deposits retained to cover outstanding utility charges owed to a municipality or recording fees collected in excess of the amount actually required to record a document.
Under Florida's unclaimed property laws, funds that remain unclaimed for the applicable dormancy period are generally considered abandoned property.
Before remitting the funds, the title company must perform the required due diligence efforts to locate and notify the apparent owner. If those efforts are unsuccessful, the funds must be reported and remitted to the Florida Department of Financial Services' Unclaimed Property Program in accordance with state law.
This process is commonly referred to as "escheatment," although the rightful owner or heirs may still be able to file a claim with the state to recover the funds later.
This is for informational purposes only and should not be considered legal advice. Parties involved in escrow disputes should consult qualified legal counsel regarding their specific circumstances.