Our firm works with several local escrow companies serving as their general legal support. Our firm has been successfully handling interpleader cases among other legal issues for escrow companies. After last year’s changes to the processing of escrows brought on by the TILA-RESPA integrated disclosure rule, our services have become even more critical to our escrow company clients. The required changes have resulted in longer escrows, and unfortunately, in more failed real estate transactions. When the escrow company, as the holder of monetary deposits cannot obtain mutual cancellation instructions for these fund distributions, we can help by filing an interpleader lawsuit.
What is Interpleader?
Interpleader is a very specialized type of lawsuit designed to allow the holder of funds to which conflicting claims are made by others to join those adverse claimants in a court action and force them to settle or litigate between or amongst themselves. Upon placement of escrow funds with the court, the holder of those funds can receive a discharge of liability regarding the ultimate disposition of those funds. In short, interpleader is a great legal option available to an escrow company holding escrow funds from failed real estate transactions, yet it is still rarely used and is often misunderstood by both attorneys and real estate professionals.
Benefits to Filing Interpleader
As an escrow company holding funds that are in dispute because of a failed contract, a wide number of concerns immediately materialize, including:
- The risk of being named as a defendant in a lawsuit filed by either of the parties to the failed transaction. This can become a very costly and very time consuming legal process;
- The accounting/bookkeeping issues that result from holding onto escrow funds for an indefinite period of time;
- The time and expenses associated with the role of a “mediator” between parties to a failed escrow that cannot come to terms on how or to whom funds should be released; and,
- The funds maintained in your escrow trust account becoming a prime target for employee embezzlement, resulting in additional cost and risk to the escrow holder.
You will notice the benefit of retaining Naheedy & Vondrak, LLP immediately. Our firm conducts a free audit of your trust account if needed. In the event a failed escrow transaction occurs or surplus funds cannot be designated we will file the interpleader action on your behalf. Immediately upon filing the interpleader the funds are removed from your trust account and you are relieved from the liability of holding the disputed funds. Further you remove the risk of being named as a defendant in a breach of contract lawsuit initiated by either adverse party. Since all of our attorney fees are paid by the court out of the disputed funds that have been deposited, your escrow company will pay only the cost of filing the suit which will be reimbursed upon discharge of the interpleader.
Additionally, Naheedy & Vondrak, LLP maintains relationships with dozens of real estate brokers and salespeople throughout Southern California. We will always do our best to match up the escrow needs of our broker clients with those escrow companies with whom we also maintain a professional relationship.