Buyer’s deposit paid by a friend?
By James L. Goldsmith, Esquire
This question comes up surprisingly often. A friend pays the buyer’s deposit by issuing a check payable to the listing broker. When the agreement is accepted that check goes into the broker’s escrow account. When the deal falls apart and the buyer is entitled to a return of her deposit, who gets it, the friend or the buyer?
Checking Real Estate Licensing and Registration Act (“RELRA”) and Rules and Regulations of the State Real Estate Commission (“Rules”) and the agreement of sale offer little assistance. None of these sources really contemplate the deposit being paid by someone other than the buyer. For example, RELRA provides that if an offer is not accepted “the broker shall promptly return the check uncashed to the buyer . . .” It is not being returned to the buyer because it was never paid by the buyer!
The agreement of sale is slightly more specific, certainly so in Paragraph 23(C), which provides that if there is a dispute over the deposit not resolved within 365 days, the buyer may request that the broker disburse the deposit monies to the “buyer.”
The real problem for the broker is that the buyer and the person paying the buyer’s deposit may be at odds and the broker is in the middle with no hope of satisfying both. If a check payable to both the paying party and the buyer will work, good! At least the parties will have to endorse the check and in the process hopefully resolve their differences. I am otherwise inclined to recommend that the check be made payable to the buyer.
The better answer is that you don’t find yourself in this situation in the first place. This does not necessarily mean that you never accept a deposit check from one other than the buyer. If you do, however, obtaining the written agreement of the payor allowing any return deposit to be made payable to the buyer, may suffice. At the very least, having a copy of a written notice signed by the paying party that you will return the deposit to the buyer is in order. In other words, anticipate that a deposit paid by another may have to be returned and provide for this contingency in writing before you accept the check.
Copyright © James L. Goldsmith, Esquire, CALDWELL & KEARNS, P.C., 2013
All Rights Reserved
Jim Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission. He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. He may be reached at www.realcompliance.com.