Nobody wants one of their contracts to cancel and even more so when the parties are in disagreement over who will receive the deposit monies. Unfortunately until the parties either agree to a disbursement in writing or a court order is entered directing the payment of funds to one party or the other, there is not a lot for the escrow agent to do under these circumstances.

This being the case, we always recommend that the parties carefully consider their position and discuss same with an attorney. Often times we find that a party is so wrapped up in the emotion of a transaction that their vision is fogged with regards to the terms of the contract they entered. An attorney representing the party’s legal interest can best advise them as to their legal standing with regards to the deposit money in question. If the parties cannot quickly make a decision and agree to same in writing, then the escrow agent is required to deposit the funds in question into the court registry by filing an interpleader action. This type of action essentially places the court on notice that there is a dispute between the Buyer and Seller and that the escrow agent is placing the funds with the Court until that dispute is resolved. It is important to note that the escrow agent will be entitled to repayment of their costs and fees associated with filing this action out of the funds that are being deposited. The remainder of the funds will be available to the prevailing party in the lawsuit.

Again, nobody wants to be stuck in the middle of this situation but often times a careful review of the contract terms and calm discussion with the parties can lead to proper resolution without added costs or stress of the parties involved. The best way to avoid potential forfeiture of deposit funds on either side of a transaction is to keep a timeline of important dates and to make sure that extensions to these dates are requested as needed or that proper responses (such as lender approval) are obtained within the necessary time period.