Legal


5/4/2015

Notes from the MAR Legal Hotline

 

Michael McDonagh, MAR General Counsel
Ashley Stolba, MAR Associate Counsel  
Justin Davidson, MAR Staff Attorney

 

May, 2015

 

Q.        I am a licensed salesperson and have decided to leave my office to join another firm.  I have two active listings. My new broker has advised me that I cannot take my listings with me without consent of my current broker and my client. Is my new broker correct?          

 

A:  Your new broker is correct.  Massachusetts law requires that listing contracts be executed between the seller and the broker, rather than the salesperson. Absent an agreement between you and your broker stating otherwise, the listing will remain with the broker, even if you leave that office.  If, however,  your current broker agrees to release the listings to the new office, the seller must agree.  Remember, the listing agreement was executed between the seller and the broker, and the seller has no requirement to follow you to another firm even if the current broker has given you permission to do so. 

 

It is highly recommended that when you join any office you include specific provisions in your independent contractor agreement that clearly explain how  listings you have at the time of your termination (whether voluntary or involuntary) will be handled. It is much simpler to have this conversation when you join an office, rather than when you leave.

 

 

Q:  I am a licensed broker and I acting as an escrow agent for a deal that recently fell through. I represent the seller, and the buyer backed out at the last second, citing what he called improper repairs required under the contract.  The buyer is asking for their $11,000.00 deposit back, and the seller’s attorney has sent me a letter demanding that I release the deposit to the seller.  The letter says that if I don’t send the funds they will sue me.  Who is entitled to the deposit?  Can they sue me? 

 

A: Escrow disputes are an unfortunate byproduct of unsuccessful real estate transactions.  Luckily, fifteen years ago, one of the most effective tools in real estate brokerage was signed into law:  "An Act Prohibiting Certain Claims Against Escrow Agents.” 

 

Under this law, it is unlawful to name an escrow agent, typically a real estate broker, as a defendant in disputes between buyers and sellers where the accepted offer or Purchase and Sale Agreement authorizes the escrow agent to continue to hold funds in the event of a dispute.  Only if the agent violates his instructions is the agent able to be sued.  This language is found in specific clauses in all of MAR's standard real estate form contracts.  In your case, it is unclear who is entitled to the disputed funds; however, the escrow agent should never be the one to determine to whom the funds should be paid. There are many questions that need to be answered before anyone can determine who is entitled to the deposit. Ultimately, the parties, with the help from their attorneys, a judge, or an arbitrator, should make the decision as to whom escrowed funds should be paid.

 

Q:  I am doing my year end books and realized I have been holding a disputed deposit for almost six months. How long is too long to hold the funds?

 

A:  The state escrow regulations do not contain a time-period specifying how long you may hold the funds. In fact, if the parties have agreed to allow you to hold the funds pending mutually written instructions from the buyer and seller, or a court order, then you will have to hold it indefinitely per that agreement.