what is an escrow agreement?
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What is an Escrow Agreement?G r e g g N a t h a n s o n
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What is an Escrow Agreement?
• Contract containing parties' rights and responsibilities -protects all sides
• Parties deposit funds, maybe documents "in escrow" with independent Escrow Agent for safekeeping
• Escrow Agent releases funds/documents from escrow once specified conditions are met
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WHAT SHOULD AN ESCROW AGREEMENT COVER?
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What Should an Escrow Agreement Cover?
• All affected parties (Buyer, Seller, contractor, lender) and Escrow Agent
• Escrow deposit (funds, documents)
• Release trigger - who gets what, and when
• End date - then what happens
• Fees
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What Should an Escrow Agreement Cover?
• Dispute resolution
• joint written instructions or interplead
• pay Escrow Agent costs and attorney fees
• Liability limitation and indemnity to protect Escrow Agent
• Boilerplate (include notice provisions)
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Types of Escrow Agreements & Common Issues That AriseC a i t l i n M c C o u r t L e s z c z y n s k i & L i z C a s s e l m a n
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Common Types of Escrow Agreements
• Water Escrows (standard on the East side, not so much on the West)
• Occupancy Escrows (Security Deposit Escrows)
• Repair Escrows
• Pool Escrows
• Earnest Money Deposits
• Secured Indemnities (to obtain Lien Releases, Mortgage Discharges, etc.)
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Common Escrow Agreement Issues
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• Agreement doesn’t contain a drop dead date • Agreement doesn’t give EA enough or unilateral authority • Lots grey area requiring EA discretion
• Who pays any shortage?
• Terms of PA incorporated automatically• Depositor of the funds is a non-party to the transaction• Repairs completed but one party dissatisfied with quality of work• Parties deviate from escrow agreement conditions without written
modification
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Disputes & ResolutionsL a v i n i a B i a s e l l
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We have a problem!
• Funds released to the wrong party
• Agent determined buyer/seller was entitled to the funds
• Mistake/Pressure/Really Good Customer
• Funds released without proper authorization or without the preconditions being satisfied
• Accepting verbal direction can be risky
• Missing documentation
• Funds released without obtaining a payoff or release/discharge
• Parties to the agreement cannot agree on how to release the funds – Agent in the Middle!
• Lawsuit against the Escrow Agent alleging Agent did not perform or was negligent
• Funds being held by Agent for years into the future
• Failure to sign an escrow agreement
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Now what?
• S t a y N e u t r a l – D o n ’ t t a k e s i d e s
• C h e c k t h e t e r m s o f t h e c o n t r a c t f o r o p t i o n s• Parties agree to a mutual resolution in writing• File an interpleader action• Return the money to the depositor – typically the buyer or seller• Hold the funds & withdraw a monthly fee• Pay the lien claimant/other creditor
• M a k e a p l a n & a c t q u i c k l y
• E s c h e a t i n g m o n e y – N o t u s u a l l y a n o p t i o n
• L i t i g a t i o n
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Thank You
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