Release of Earnest Money

by | Sep 17, 2015 | Legal Tips

In the contract there are several places that say “and the earnest money shall be released to the Buyer or Seller.”  Does this provision mean a release does not need to be signed because the contract clearly states who gets the earnest money in the particular situation?  The answer is no. A release is still required. You must always comply with state law.  The contract language does not attempt to circumvent state law as it pertains to the release of the earnest money; rather, the provision was placed in the contract to give the parties and the court direction as to whom the earnest money should be released in that particular situation if a dispute arises.

In addition, the contract states in Paragraph 4 that if a dispute arises over the release of the earnest money and a court action is brought by the escrow agent or a party to the contract, the non-prevailing party will be responsible for the prevailing party’s attorney fees and costs. Hopefully, when a party to the contract is being obstinate and refusing to sign a release that they rightfully should sign, referring the party to this language together with showing them Paragraph 4 will result in the client being reasonable and signing a release. Otherwise, they likely would not be the prevailing party and could be responsible for everyone’s attorney fees and costs.

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