The State Treasury Department says that earnest money is subject to escheat unless both the buyer and the seller communicate (e.g., letter or phone call) with Stewart within the last three years. The state says property is presumed abandoned on June 1 if there has been no communication from all claimants within the last three years as of June 1 of that year. You must file a report on or before November 1 of that year and you must deliver the unclaimed property to the state. Communication can be by phone conversation or correspondence. The state says that the account is "unclaimed" if only one party communicates with the title company within the last three years.
If a contract (e.g., indemnity) has a definite term between the title company and another party, the state says the escheat period begins on this date.
While we do not agree that the Treasury position correctly interprets the law in all cases, we recommend compliance with the Treasury position where possible.
1. When holding money for repairs or an indemnity, consult with your attorney or Stewart underwriting personnel. The agreement should have a time limit for return of the funds.
2. Diary (or tickler) your earnest money files for six months after receipt of the earnest money. We recommend that you then mail a letter and earnest money release to the seller and buyer unless you know a closing will occur. The current TREC contract provides in the broker's paragraph (paragraph 8) that Escrow Agent is directed to pay Listing Broker one-half of the earnest money the seller receives on default. If you hold this or a similar contract, also send the release to the broker. The broker should then sign the release if the buyer does not receive all the money. We recommend that the letter state that you may tender the money to the State Treasury, Unclaimed Property Division, if the seller and buyer do not respond and if the funds are not interpled.
3. We recommend that you re-diary the files for March 1 of the year that constitutes the third year as of June 30 of that year following the most recent communication by both seller and buyer. If you are holding a large amount, we suggest you send a second letter to the parties.
Examples based on state position:
Example: The title company received $500 earnest money under a TREC contract and opened the file October 30, 1992. The title company sent releases of earnest money to the buyer, seller and broker on April 30, 1993. There was no subsequent communication by the seller, but there was subsequent communication (letter or call) by the buyer. On or before November 1, 1996, you should deliver the money to the state.
Example: The title company received $20,000 earnest money under a TREC contract and opened a file on October 30, 1992. The title company sent releases of earnest money to the seller, buyer and broker on April 30, 1993. On June 15, 1993, the title company received correspondence (letter or call) from the buyer. On March 15, 1993, the seller claimed the earnest money by telephone conversation that you noted in the file. We recommend you send a second letter on March 1, 1996. We recommend you tender the funds to the state on November 1, 1996 (if you do not receive instructions from the buyer and seller).
Example: The title company received $4,000 earnest money on a commercial contract and opened a file on October 30, 1992. The title company sent releases of earnest money to the seller and buyer on April 30, 1993. On June 15, 1995, the title company received correspondence (letter or call) from the buyer. The title company has not received communication from the seller. The title company should tender the money to the state on or before November 1, 1996.
The letter should request instruction by the parties as to release of the earnest money and should include a Release of Earnest Money form. It should say the title company may interplead the funds or tender the funds to the state as unclaimed funds if it does not receive instructions from all parties.
If you decide to interplead, you must interplead funds before the funds are subject to escheat (the third June first anniversary since communication from all parties).
4. If you are an independent agent, we recommend you contact your attorney or accountant and establish your own procedures.