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Real Estate Litigation often arises from disputes over forfeiture or recovery of deposits under real estate Purchase and Sale Agreements.


"CAN I KEEP THE DEPOSIT?" Sellers ask.

Buyers often think that only their initial deposit in escrow is at risk if they can't close. However, some contract forms, notably some of the FR-BAR (aka FAR-BAR) agreements such as the "As-Is Residential Contract for Sale and Purchase," commonly used throughout Florida, put ALL deposits, paid and unpaid, AT RISK. They provide that: "All deposits paid or agreed to be paid, are collectively referred to as the Deposit." The Buyer Default provision says that if Buyer defaults, "the Seller may elect to recover and retain the Deposit" as agreed upon liquidated damages. This means that Seller would be entitled not just to the deposit placed in escrow, but ALSO to additional deposits called for but not yet made.

Florida courts have enforced this provision. The parties could vary this in writing at the outset. However, there's no self-help. The parties have to agree in a signed writing to the termination of a contract and release of Deposit or prove a default in court. Practically speaking, sometimes the Seller will agree to take what's in escrow rather than fight over money that may be hard to collect. (Clearly, the amounts at issue will be a factor). However, it's always better to have a clear WRITTEN understanding at the beginning!

Bear in mind, even if neither the seller or buyer initiate a lawsuit over the deposit, if the parties fail to agree in writing to how the deposit will be disbursed after a failed sale closing, the escrow agent will often file a lawsuit, called an interpleader, and serve summons on the buyer and seller, forcing them to litigate the issue. This can make it even more expensive for the parties. Where a fight over the deposit can not be quickly resolved, Buyer or Seller should initiate a prompt pre-suit mediation and then file suit if the matter is still not resolved. It's important to have a Florida attorney who has a comprehensive understanding of the Florida courtroom procedure and rules of evidence.

As there are dozens of forms associated with the most commonly used contract types in Florida, work with a truly experienced Florida real estate agent at the outset.  After reviewing with your agent, consult with Florida counsel if you are still unsure about anything. Don't be penny wise and pound foolish.

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