U9: Downpayment Escrow and Financing Contingency

Question 1

The Downpayment.

Answer 1

Conventional down payment is 10% of the purchase price.

the downpayment belongs to the buyer until the seller has the right to receive the money

Question 2

GBL 778-a “Contracts requiring Downpayment in escrow”

Answer 2

Governs anyone [LL’s] who has agreed to hold the downpayment money in escrow

• can’t commingle funds
• obliged to tell the person who’s $ you are holding where it is being kept
• NOT required to maintain separate bank accounts
• do not have to put the $ in an interest bearing account

Question 3

Attorney Escrow Accounts

Answer 3

A lawyer possession of third-party funds is a fiduciary and MUST NOT MISAPPROPRIATE such funds OR COMMINGLE funds.

Escrow Funds must be maintained in a banking institution that complies with appellate division rules

Attorney may maintain personal funds in the account to cover possible charges.

Attorney must notify client or thirdparty when funds are recieved and where they are kept

Must maintain account records for 7 years including bills to clients.

Must make records available to the grievance committee.

Question 4

Titles for Attorney Escrow Accounts

Answer 4

must be identified only as

1. “Attorney special account”
2. “Attorney trust account”
3. “Attorney escrow account”

Question 5

IOLA account

Answer 5

If the $ is not kept in an interest bearing account it should be in a IOLA

Funds are put in an IOLA if directed by a client or if they are qualified funds

Question 6

criteria for determining whether to use an interest account or an IOLA account

Answer 6

Amount of interest to be earned

cost of establishing or administering the account

Availability of an IOLA account

Question 7

IOLA protection

Answer 7

No attorney shall be liable in damages nor professional misconduct because of a deposit of funds into an IOLA account “pursuant to a good faith belief that such moneys were qualified funds”