Conominimum Contract: Lose Money In Escrow If Contract Is Broken?

Added June 25, 2007 by Ilyce R. Glink and Samuel J. Tamkin

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Summary: Will you lose money in an escrow account, if you try to get out of a contract to purchase a preconstruction condominium? What will happen to the money held in escrow for the contract on the preconstruction condo. Ilyce and Sam explain what the possibilities are for getting the money in escrow back from the preconstruction condo contract.

Q: We are in the early stages of litigation on a preconstruction condo. We want out of our contract. We have a large amount of money held in escrow.

I'd like to know what happens to that money while we are in litigation, and what happens to the money if the closing date approaches and we don't close while the litigation is in progress?

A: If you are currently in litigation, the escrow company has been notified of the litigation or should be notified of the litigation. The escrow company may even be involved as a party to the litigation.

In most of these cases the escrow company will not release the funds they are holding until the litigation is settled. In many cases, the escrow company may even tender the money to the court and let the court decide how the money should be distributed.

Depending on the issues you face in your litigation, your attorney should be able to tie up the escrow funds until your issues are resolved. While the specific issues in your case aren't clear from your letter, if you lose your case, you might lose the funds held in escrow and even more, if attorney's fees are awarded.

If you win your case, you should be able to terminate your contract and get the funds back from the escrow.

Jan. 25, 2007.

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