SENATE BILL REPORT

SB 6809

BYSenators West, von Reichbauer, Rasmussen and Johnson

Regulating the withholding of commissions by closing agents.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 1, 1990; February 2, 1990

Majority Report:     That Substitute Senate Bill No. 6809 be substituted therefor, and the substitute bill do pass.

     Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; Fleming, McCaslin, McMullen, Matson, Moore, Sellar, Smitherman, West.

Senate Staff:Benson Porter (786-7470)

                February 2, 1990

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, FEBRUARY 2, 1990

BACKGROUND:

Currently, disputes arising about the disbursement of funds from a closing agent to a real estate broker may require civil actions for settlement.  Concern has been expressed that closing agents may periodically hold a real estate broker's commission for an extended period of time.  In addition, if the terms of the real estate agreement are uncertain, the closing agent may have difficulty in determining whether the funds should be disbursed to the broker.

SUMMARY:

Provisions governing the disbursement of funds from a closing agent to a real estate broker are set forth.

A closing agent is required to hold in trust the amount of money demanded by a real estate broker as a commission until certain conditions are met.  In situations where a broker provides notice demanding disbursement and the real estate agreement does not require such disbursement, the closing agent shall disburse the demanded commission in two circumstances.  The closing agent shall disburse the funds if the agent receives written instructions signed by the principal authorizing the closing agent to disburse the funds or upon receiving an order from a court or arbitrator directing the agent to disburse such funds.  If neither condition is met within 15 days following closing, the agent is required to file an interpleader action with a court and deposit the demanded funds with the court.

The real estate broker making the demand is required to pay the closing agent's reasonable costs and attorney's fees for filing the action up to $500.  The prevailing party in the interpleader action is entitled to receive reimbursement for costs associated with the action.

Any broker making a demand under this act warrants that there is a written agreement which provides for payment of the commission to the broker.  Moreover, the broker may only demand his or her share of the commission.

The form of the notice provided by a broker under this act is set forth.

EFFECT OF PROPOSED SUBSTITUTE:

A closing agent is required to hold in trust the amount of money demanded by a real estate broker where the agent receives notice demanding disbursement and the real estate agreement does not require such disbursement.

Other clarifying amendments are made.

Appropriation:  none

Revenue:   none

Fiscal Note:    none requested

Senate Committee - Testified:   Bob Mitchell, Program Manager, Department of Licensing; Pam Barrett, WAR (pro); Bob Gamielson and Doug Tingvall, WAR (pro); Jean Morgan, Escrow Association (con)