by Peg Ritenour
VP Legal Services & Administration

In last month’s issue of Ohio REALTOR, brokers were reminded of their obligation to review their purchase contracts and trust accounts to determine whether they were holding any earnest money deposits that needed to be disbursed by Sept. 1.

This obligation to return earnest money by September 1 is triggered if all of the following facts exist:

1. A purchase contract was entered into, but the transaction did not close;
2. The purchase contract contained language that provides that the earnest money will be returned to the purchaser after two years if the parties have failed to provide the broker with written instructions specifying how the earnest money is to be disbursed or notice that legal action has been filed; and
3. It has been over two years from the date the earnest money was deposited in the brokerage trust account.

If all of the above events have occurred, a broker has a duty to remit the earnest money to the buyer as soon as possible, but no later than September 1 of the year the disbursal should have been made.

Before disbursing any disputed earnest money to the purchaser, it is critical that brokers make sure that the purchase contract contained the language described in paragraph (2) above.  That type of language was authorized by legislation that became effective in April 2009.  Thus, this provision, which was optional – not mandatory – would only be in purchase contracts signed after April 2009.  Moreover, because it was optional language, some brokers may not have included this provision in their purchase contracts.

If the purchase contract does not contain the above provision then under the license law, a broker cannot disburse the earnest money to either the purchaser or seller until the parties provide written instructions or a release to specify how the broker is to disburse the money or a court issues an order directing its disbursal.

In this instance, disputed earnest money held for more than two years may be considered to be “unclaimed funds” that the broker can turn over to the Ohio Division of Unclaimed Funds.  Before doing so, however, the broker is required to give the owner(s) of the funds a “due diligence notice” (Form OUF-8 Notice of Unclaimed Funds).  If the funds are less than $1,000, the notice can be sent by first class mail.  If the funds are $1,000 or more, the notice must be sent by certified mail, return receipt requested.

The notice must include a self-addressed, stamped, return envelope.  No notice is required for funds under $50, however, these funds are still reportable as unclaimed funds.

Form OUF-8 provides notice to the owner(s) of the funds that he has 30 days to show an interest in the funds by responding to the broker or the funds will be transferred to the Division.

If no response to the notice is received or if the notice is returned for a bad address, the broker can remit the funds to the Division.  If either buyer or seller responds to the notice, the funds are not considered unclaimed and cannot be turned over to the Division.

The unclaimed funds law requires all brokerages to file an annual report with the Division (Form OUF-1 Unclaimed Funds Reporting Form).  The annual report is due November 1 of each year even if there are no unclaimed funds to report.

If a brokerage is not holding any unclaimed funds or if all owners respond to the OUF-8 Notice, the brokerage must file a Negative (None) Report using OUF-1 Reporting Form.  The annual report, due November 1, 2011 is for funds dormant as of June 30, 2011.

Additional information regarding the unclaimed funds regulations, reporting requirements and reporting forms can be obtained from the Division of Unclaimed Funds website at www.com.ohio.gov/unfd.