Section 5: Escrow Accounts in FL Flashcards
Escrow funds can be:
- Earnest money deposits
- Down payments
- Sales proceeds
- Tenant security deposits
- Timeshare purchase money
What is earnest money?
Common form of trust funds that are an indication of how earnest the buyer is about purchasing the property.
Broker’s trust accounts permit them to deposit…
A broker may place and maintain up to $5,000 of personal or brokerage funds in the broker’s property management account and up to $1,000 of personal or brokerage funds in the broker’s sales escrow account.
Commingling
Mixing together escrow funds from others in the same bank account that contains personal/business funds.
It is illegal.
An exception is that brokers may deposit a nominal amount of their own money to cover expenses related to teh account.
Conversion
Using escrow funds for your own use.
Escrow funds comingling and conversion penalties
Penalties such as having your license suspended or revoked.
Setting up an escrow account
Separate bank account that must be designated as an escrow account and be in the firm’s name.
Escrow account requirements
- Federally insured bank, savings and loan, trust company or credit union within Florida
- At lease one of the brokers must be signatory on the account
- Others can perform reconciliation but broker must sign off on it
Escrow deposits requirements
- Each check, deposit slip or bank statement must contain the word “escrow” as part of the account name.
- Shows bank the nature of the account
- Must have audit trail
- May be audited byu FREC
Florida broker Kenneth is allowed to place and maintain up to amount of personal or brokerge funds in the broker’s sales escrow account.
$1,000
Operating funds must never be commingled with trust funds, but a small amount of operating funds may be placed in an escrow account to cover bank fees and other costs.
A Florida broker uses a third party to hold the escrow funds. In this case, what must that broker do?
The broker must verify the deposit has been made.
Florida brokers must verify the deposit and provide the cooperating broker with the name, address, and phone number of the escrow holder.
A Florida broker opened a new escrow account. In order for the broker to comply with FREC regulations, which of the following must be true about the financial institution?
It is a federally insured depository institution located in FL.
When a broker decides to hold escrow and establishes an escrow account, how many brokers within the firm must be signatories on the account?
At least one.
A Florida broker is establishing an escrow account. What must occur for the escrow account to be in compliance with Florida law?
It must be designated as an escrow account and be in the firm’s name.
Escrow and the sales contract
Brokers must provide the seller’s broker with the name, address and telephone of the escrow holder and request a written notice verifying the deposit no later than 10 business days after the deposit is due.
Escrow funds held by title company or attorney
There is no requirement to report anything to the Department
of Business and Professional Regulation or FREC
Time limit to deposit escrow funds.
72 hours after the brokerage firm initially receives the funds.
A sales associate who receives an escrow deposit must give the deposit to the broker by the close of the next business day, or within 24 hours. If this time period is 24 hours, the broker will have an additional 48 hours to make the deposit, for a total amount of 72 hours (three business days).
A business or banking day does not include legal holidays or the weekend.
Post-dated escrow checks
licensee should check the brokerage’s policy regarding handling procedures, but this usually involves getting the seller’s approval in writing and storing
the check in an office safe until it may be deposited in the escrow account.
Interest-bearing Escrow Accounts
Brokers may only deposit escrow funds into an interest-bearing account if written permission is obtained. Who receives the interest and the timeframe of when the interest is to be disbursed must be included in the permission.
Ways Escrow May Be Disbursed
- An offer is rejected
- An unaccepted offer is withdrawn
- A court has ordered the funds’ disbursement
- Broker “reasonably interprets” the contract
Escrow account journal
Each time a deposit is made or funds disbursed from the account, the journal must be updated to include:
* date
* name of person providing cash or whom the funds are being paid
* Check number
* Amount of the cash receipt or disbursement
* running balance for each day on which the deposit or disbursement is made
Escrow record keeping penalties
Failure to comply with required record keeping requirements is
considered demonstrating incompetency to act as a broker or licensed business entity and can result in a reprimand, license suspension, or license revocation.
When must a Florida sales associate deliver the escrow funds to her broker if she receives the funds on a Friday?
End of the day on Monday
A Florida broker may only disburse escrow funds
Per the contract terms
How often must a FL broker update the escrow journal?
Each time a deposit or withdrawal is made.
How often should escrow accounts be reconciled?
Monthly
When is a FL Broker permitted to disburse escrow funds?
When permitted by the terms of the contract or by mutual written request from both parties.
The [blank] is used to keep track of all funds from all clients coming into and going out of a specific FL bank account.
Journal
Escrow Settlement Procedure Options in Florida
When a broker maintains a trust account has an adverse claim, the broker has 4 options:
1. Request an escrow disbursement order (EDO) from FREC
2. If all parties consent, broker may submit the matter to arbitration
3. Seek a court’s adjudication of the matter
4. If parties consent, broker can submit the matter to mediation.
Escrow Settlement Dispute timeframe
- FREC must be notified within 15 days of the last party’s demand on the deposit
- Broker must choose acceptable settlement procedure within 30 business days of the last demand and choice must be reported within that same time period
- Once final disposition has been determined, must be reported to FREC within 10 days of the settlement.
A Florida broker is completing the EDO form. What other information must also be included?
A copy of the executed contract
What information must be included on an EDO form?
a copy of the executed contract or lease must be attached, along with the name of the requesting broker, and the buyer’s and seller’s names. Additionally, copies of any financial denial letters, or other items that may help in reaching a determination, must be attached.
What do brokers in Florida have the option to file to help prevent lawsuits against them when escrow funds are in dispute?
Interpleader
When there is an escrow dispute, what is it called when an interpleader asks the court to make a decision?
Adjudication
When the broker can’t pay out the deposit to one of the parties because both the buyer and seller have made a claim to the escrow, what is it called?
Conflicting demands
According to the Florida Vacation Plan and Timesharing Act, consumers have [blank] calendar days in which they can cancel their purchase.
10 days
How long do Florida landlords have to make a claim against a security deposit?
30 days
What act in Florida specifies that buyers will receive a full refund of their reservation deposit upon written request?
The Florida Vacation Plan and Timesharing Act
How much must buyers of a preconstructed condo parcel typically put down to go into escrow?
10%
How many days after a tenant delivers advance rental money must a landlord provide a written account of how it is being held?
30 days and must state how advance rental money is being held.
A Florida tenant surrendered his apartment in top condition 15 days ago. In accordance with Florida law, when can the tenant expect to receive his security deposit refund?
Florida law requires that security deposits be refunded to a tenant within 15 days after the tenant has vacated the property, unless the landlord is keeping the deposit to pay for damages. The landlord may also make a claim against the deposit up to 30 days after the property has been vacated.
A Florida tenant signed a lease and is required to pay advance rent. Which of the following statements is true about advance rental money?
In Florida, security deposits and advance rental moneys are treated the same.
