Escrow account deposit requirements
Definition of escrow account. An escrow account, also known as a trust account, is an account in a bank, credit union, or savings and loan association within Florida that is established to hold funds until the time comes to disburse them for a particular purpose. The account is held by a third party to a transaction and holds money, such as earnest money from a property buyer, until the property ownership is transferred at closing. Title companies with trust powers and attorneys may also be used to hold funds in escrow.
Escrow accounts may be used to hold rental property deposits and rent payments; however, while not required, sales funds and rental funds should be kept in separate escrow accounts. The funds deposited into the escrow account include cash, checks, money orders, drafts, personal property, or item of value.
Florida law mandates that the account is to hold only third-party funds with no licensee personal funds intermingled. However, the law also allows the broker to deposit personal or brokerage funds into each escrow account to be used for account maintenance fees. Thus, the broker may deposit $1,000 into each sales escrow account and $5,000 into each property management escrow account.
Sales associate funds delivery requirements. If a property buyer gives earnest money or any other deposit to a sales associate in relation to a real estate transaction, the sales associate is required to turn the money over to his or her employing broker no later than the end of the next business day, not counting Saturdays, Sundays, or legal holidays. The same timing is required for rental deposits.
For example, Buyer Susan gives Sales Associate John an earnest money check on Monday morning. John must turn the check over to Broker Justin by the end of the day on Tuesday. Let’s say that Tuesday is a legal holiday. That means John needs to turn the check over to Justin by the end of the day on Wednesday.
Definition of “immediately” for a broker. Florida administrative rules state that brokers who receive any form of funds from their sales associates related to a real estate transaction must immediately deposit those funds into an escrow account. The rule defines “immediately” as no later than the end of the third business day following receipt of the item to be deposited, with Saturdays, Sundays, and legal holidays not considered business days. The three business days begin when the sales associate receives the funds, not when the broker receives them from the sales associate.
Here’s how this works: If the funds are received on Monday, Tuesday is the first business day “following receipt of the item to be deposited.” Wednesday is the second business day following receipt of the deposit; and Thursday is the third business day, the end of which is the deadline for depositing the funds into the escrow account.
So, given the previous example, if associate John receives the earnest money check from Susan on Monday and turns it over to broker Justin on Tuesday, Justin must deposit the check into his escrow account no later than the end of the day on Thursday. If Tuesday is a holiday and John turns the check over to Justin on Wednesday, Justin has to deposit the funds into his escrow account by the end of the day on Friday.
Requirements if deposited with title company or attorney. Funds related to a real estate transaction may be deposited or placed in escrow with a title company or an attorney. When this happens, the name, address, and telephone number of the company or attorney must be noted on the sales contract by the licensee who prepared the contract. All deposit requirements for the broker’s escrow account also apply to deposits made with a title company or attorney.
When funds are due for deposit, the licensee’s broker has 10 business days to request in writing that the title company or attorney provide written verification that the funds were received and deposited. Then, within 10 business days of that request, the broker must provide the seller’s broker either a copy of the written verification that the funds were received and deposited or a written notice that the broker did not receive verification of the funds and deposit. This verification is not necessary if the title company or attorney was nominated in writing by the seller or the seller’s agent. If the seller is not represented by a broker, the buyer’s broker is to notify the seller directly.
If the funds have been placed in escrow with a title company or attorney, there is no Florida statute regulating those accounts. Consequently, the FREC will not step in to resolve any conflict over disbursement of the funds if the transaction does not close. To settle the dispute, the parties will need to rely on the appropriate court and bear the expense of doing so.
Management of escrow accounts
Escrow account signatory. Florida administrative rules require the broker to be the signatory on all escrow accounts. If there is more than one broker licensee within the brokerage, then any one of those licensees may be the designated signatory.
Escrow account maintenance. The broker is responsible for reconciling the accounts each month and for ensuring the accounts comply with Florida laws. The broker also must make a monthly written statement that compares the broker’s total liability with the bank balances of all escrow accounts.
The statement needs to include the date the account reconciliation was completed, the date used to reconcile the balances, the name of the bank and the account, the account number, account balance and date, any deposits in transit, outstanding checks, and an itemized list of the broker’s trust liability.
The broker must keep records of all deposits, the source of the funds, and each account and provide those records and transaction-related agreements to the DBPR when requested. The records must be kept for at least 5 years.
Requirements for interest distribution. The broker may hold escrow funds in an insured interest-bearing account in a banking facility located within Florida. All parties associated with the particular transaction must agree in writing to use an interest-bearing account. They must also agree to whom and when the interest will be disbursed.
Requirements for conflicting demands for escrow funds. When a real estate transaction does not close, the earnest money and any other related funds must be disbursed to the appropriate party. If the parties to the transaction do not agree on who should receive the funds and both parties make demands for the funds, the broker must notify the FREC of the conflict within 15 business days of the last demand received for the funds. The broker should use the Notice of Escrow Dispute/Good Faith Doubt form found online at
The broker must also proceed with a settlement procedure (see below) within 30 business days after the last demand and notify the FREC of the procedure being used to resolve the conflict. The notification timing requirements for both the conflict and the settlement procedure start on the same day.
For example, if the broker received the last demand for escrow funds on June 1, the 15 business days for notifying the FREC of the conflict begins on June 1; and the 30 business days for notifying the FREC of the settlement procedure also starts on July 1.
Good-faith doubt procedure and situations. The term “good faith” is used to describe a sincere or honest motive without any malice or intent to defraud someone else. People enter into contracts, such as real estate sales contracts, with a presumption of good faith that the parties will be honest and fair and not negatively impact the other party’s right to benefit from the contract. When one party appears not to be behaving in good faith, the behavior creates doubt in that party’s good faith. If that doubt is sincere and honest, it is referred to as good-faith doubt.
If a broker has good-faith doubt as to who is entitled to the funds held in the broker’s escrow account, he or she should first look to the sales contract for the escrow instructions. If the contract does not clear up the doubt, the broker must notify the FREC within 15 business days after having such doubt, using the Notice of Escrow Dispute/Good Faith Doubt form. The broker may have a good-faith doubt based on any of many situations.
For example, one party indicates he does not plan to comply with the closing schedule and terms but does not provide the broker with instructions for disbursement of the trust funds or provides instructions that do not match those in the sales contract.
Another example would be that the transaction does close, and the parties provide different instructions for the disbursement of the funds.
Yet another situation leading to good-faith doubt for the broker would be if the transaction fails to close and one party does not respond to the broker’s request for disbursement instructions, thus requiring the broker to send notice to that party that the funds will be released to the other party if he or she does not respond by a given date.
Once the broker develops good-faith doubt, he or she must then proceed with a settlement procedure (see below) within 30 business days after having such doubt. The determination of good faith doubt is based upon the facts of each case brought before the FREC.