Response to a Recent Inquiry
Regarding
Abandonment of Claims to
Disputed Trust Funds
Dear _______________________:
We have received your recent letter inquiring as to the procedure which should be followed by brokers in handling disputed trust funds. Of particular interest to you was the situation in which one of the disputing parties appears to have abandoned his claim to the funds, but the broker is unable to locate this person to confirm it. In this regard the Real Estate Licensing Board offers the following suggestions:
First of all, to help avoid potential disputes over the disbursement of trust funds (earnest money deposits, tenant security deposits, etc.), the broker should at the time he receives the funds make every effort to ensure that the buyer and seller (or landlord and tenant) have a clear understanding as to how the funds will be disbursed, especially in the event the transaction does , not close. The sales contract or lease should contain clear and concise language to this effect.
If a dispute does arise, the broker should endeavor to assist the parties in reaching a satisfactory settlement. But if the broker is unsuccessful, he must retain the disputed funds in his trust account (Licensing Board Rule .0107(g)).
As to your specific question, if after a reasonable period of time it appears that one of the disputing parties may have abandoned his claim to the funds, then the broker should make every reasonable effort to contact this person to determine whether he is still actively pursuing his claim. A "reasonable period of time" may be 90 days after the last communication with this person concerning the funds. "Reasonable efforts" to contact the person would at least include several telephone calls and letters to the person's last known residence (and business) address.
If after an additional 30 days in attempting to contact this person the broker has received no response from him, then the broker may proceed to disburse the funds to the other party or in such other manner as may be dictated under the terms of the contract or lease. Brokers are warned, however, not to resort to this procedure in an attempt to circumvent in any way the provisions of Rule .0107, nor should a broker at any time disburse trust funds when he knows (or has reason to believe) that a dispute exists as to the disbursement. Furthermore, brokers are cautioned to maintain complete records documenting their efforts to locate the parties to the dispute.
While this will not release the broker from possible future civil liability in the event the disputing party should subsequently reassert his claim, nevertheless the disbursement of funds in accordance with this procedure would not be considered by the Real Estate Licensing Board to constitute an improper disbursement of disputed trust funds under Board Rule .0107(g).
I trust that this satisfactorily answers your question.
Yours very truly,
NORTH CAROLINA REAL ESTATE LICENSING BOARD