by Lorie Garland
Assistant vice president
Legal Services

Last month’s Ohio REALTOR contained an article detailing the new license law provisions for handling earnest money which are effective in April. The new law provides when earnest money can be released from a broker’s trust account and allows for optional contract language for handling disputed earnest money (see Earnest Money Sample Language Available in previous article). The new earnest money provisions will be helpful in handling disputed earnest money in the future. However, what can a broker do with disputed earnest money currently being held in the broker’s trust account?

First the broker could contact the parties to see if they are now willing to resolve the dispute or file legal action. If they are not willing to do this, a broker may file an interpleader action with the court to obtain a ruling on which party is entitled to the earnest money. However, filing an interpleader action is merely an option. A broker has no obligation to initiate the legal proceeding to resolve the dispute. If the parties cannot reach an agreement and no legal action has been filed, another option may be to turn the earnest money over to the Ohio Division of Unclaimed Funds.

Ohio’s unclaimed funds law requires “holders” of “unclaimed funds” to submit an annual report and remit any “unclaimed funds” to the Division of Unclaimed Funds. A real estate brokerage is considered a “holder” and subject to the unclaimed funds regulations for the yearly reporting of various types of unclaimed funds, including wages, commissions, earnest money and other funds due and payable to others. Funds become “unclaimed funds” when the funds become dormant. This occurs when the holder has not had correspondence with the owner of the funds for the dormancy period. The dormancy period for funds held in a broker’s trust account is two years.

Disputed earnest money deposits being held in a broker’s trust account can be turned over to the Division of Unclaimed Funds if certain requirements are met. The first requirement is that the broker has had no correspondence with the buyer and seller for a period of two years. This is required to classify the earnest money as “unclaimed funds.” After the two year period, if the earnest money being held is $50 or more, the broker is required to give the buyer and seller a “due diligence notice” (Form OUF-8 Notice of Unclaimed Funds). This notice must be sent by first class mail to the buyer and seller’s last known address and must include a self-addressed stamped envelope. The notice provides that the buyer/seller has 30 days to show an interest in the funds by responding to the broker or the earnest money will be transferred to the Division of Unclaimed Funds. If no response is received or if the notice is returned for a bad address, the broker can remit the earnest money to the Division of Unclaimed Funds. However, if either the buyer or seller responds to the notice, the earnest money is then not considered unclaimed and the broker must continue to hold the earnest money in his/her trust account. The broker is required to have another two year period with no correspondence with the buyer and seller before the due diligence notice could be sent again.

The unclaimed funds law requires all brokers to file an Annual Report with the Division of Unclaimed Funds (Form OUF-1 Unclaimed Funds Reporting Form). The Annual Report is due by Nov. 1 of each year even if there are no unclaimed funds to report. The Annual Report is due by Nov. 1 for funds dormant as of the preceding June 30.

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.