Key Takeaways
- Florida business law protects companies from unfair competition, contract breaches, and partner disputes.
- Acting early saves time, money, and business relationships.
- An experienced business attorney helps you assess risk and choose the right legal strategy.
When a Florida real estate deal falls apart and both sides claim the earnest money, the contract decides who is entitled to it. The escrow agent holding the money generally cannot pick a winner. In practice, you win or lose the deposit on three things: what the contract says about your situation, whether you met every deadline, and whether you answer a conflicting demand in time. A South Florida business owner with a deposit at stake should have a real estate litigation attorney read the contract before anyone sends a demand letter. At Fornarolegal, Matthew Fornaro’s real estate transactions and litigation practice handles these matters for small businesses and investors.
TL;DR
- An earnest money deposit is held in escrow, not by the seller. When buyer and seller both demand it, the holder is caught in the middle.
- Under the standard Florida Realtors/Florida Bar residential contract, a buyer default lets the seller keep the deposit as liquidated damages. A seller default lets the buyer elect to get it back.
- The standard contract gives you 10 days after conflicting demands to try to settle, then sends the dispute to mediation.
- If a broker holds the funds, Florida rules set short clocks: notice to the state within 15 business days and a formal settlement procedure within 30 business days.
- Missed deadlines and sloppy notices cause more lost deposits than the underlying facts do. Get the contract reviewed before you send or answer a demand.
Table of Contents
- What an earnest money deposit is, and who holds it
- Do you always get the deposit back?
- What happens when both sides demand the money
- When a broker holds the deposit: the state’s escrow rules
- Mistakes that cost people their deposits
- What to gather before you talk to an attorney
- How we approach deposit disputes
- Getting the deposit decision made your way
- FAQ
- Sources
What an earnest money deposit is, and who holds it
An earnest money deposit is money a buyer puts down after signing a purchase contract to show good faith. It is not paid to the seller. A third party holds it in escrow until closing, when it is credited toward the price, or until the deal ends and someone has to decide where it goes.
Who that third party is gets negotiated. Florida Realtors notes that the choice of escrow holder is a negotiable item between buyer and seller. If a title company or attorney holds the deposit, the contract must include that holder’s name, address and telephone number. Check that block in your contract first. It tells you who you will be dealing with if things go wrong.
If a real estate broker holds the money, the rules on timing are strict. An associate or broker-associate must pass the deposit to the broker by the end of the next business day. The broker must place it in the escrow account no later than the end of the third business day after receiving it, with weekends and legal holidays excluded. Those rules matter in a dispute. A late or missing deposit can itself be the default.
Do you always get the deposit back?
No. Whether you do depends on which side defaulted and what the contract allows. The standard Florida Realtors/Florida Bar (“FR/BAR”) residential contract is the baseline many deals use, and the commercial and investor forms in South Florida often follow similar logic. The points below come from the 2019 FR/BAR residential contract. Your own contract controls, so read your version.
If the buyer defaults. That includes failing to perform obligations such as paying the deposit within the stated time. The seller may elect to recover and keep the deposit as liquidated damages, meaning an agreed amount in place of proving actual losses. Once the seller makes that election, both sides are released from further obligations under the contract.
If the seller defaults. Where the seller defaults for reasons other than failing to make title marketable after reasonable, diligent effort, the buyer may elect to get the deposit back. The buyer may also pursue damages or specific performance, which is a court order forcing the sale, under the contract’s dispute-resolution paragraph.
If neither side defaulted. A buyer who terminates under a valid contingency, such as financing, inspection or a title problem, usually has a right to the deposit. But the right depends on giving notice inside the contingency period, in the way the contract requires. A buyer who is one day late can turn a deposit refund into a default.
This is why timing and paperwork decide so many of these fights. Both sides often believe they are right. The question is who can prove compliance with the contract’s exact terms.
A worked example
Say a Coral Springs restaurant owner signs a contract to buy a small retail building, with a 30-day inspection period and a deposit in escrow. On day 28, the inspector reports serious roof damage. The buyer calls the seller’s agent and says the deal is off, but never sends written notice before day 30. The seller demands the deposit as liquidated damages. The buyer demands it back based on the inspection. Now there are conflicting demands. Whether the buyer prevails turns on how the contract defines notice, whether the call counts, and whether the period had already ended. None of those answers appears in the inspector’s report.
What happens when both sides demand the money
Once the buyer and the seller both demand the deposit, the escrow holder will normally stop and hold it. Holders are generally unwilling to release money to one side over the other’s written objection, because paying the wrong party exposes them to liability. The money stays frozen while the clocks run.
Step 1: The 10-day settlement window
The FR/BAR contract says buyer and seller have 10 days after the date conflicting demands are made to try to resolve the dispute, and if they cannot, they must submit it to mediation. Treat this as a real negotiating window. Put your position in writing, attach the contract paragraphs you rely on and the dates you met, and make a specific proposal. Vague or emotional letters rarely move the other side.
Step 2: Mediation
Mediation is a confidential session in which a neutral third party helps the two sides negotiate. The mediator does not decide anything. The FR/BAR preparation manual gives parties 30 business days from the date a dispute arises to mediate, and treats mediation as timely if it occurs or is scheduled within that period. Schedule it early. If you are the party who stalls, you hand the other side an argument.
Step 3: Arbitration or court
If mediation fails, or a party fails to mediate on time, the same manual says the parties must arbitrate rather than litigate their claims, subject to how the contract addresses disputes and licensee consent. Florida Realtors describes the general pattern the same way: many contracts name mediation as an early step, and if it does not resolve the dispute, the parties go on to litigation or arbitration. Which path applies to you depends on the dispute clause in your contract, which is why it should be read before you pick a strategy.
When a broker holds the deposit: the state’s escrow rules
If the escrow holder is a licensed real estate broker, a second layer of rules applies to the broker. They affect how fast your dispute moves.
Under the Florida Real Estate Commission’s rules, when a broker receives conflicting demands on escrowed funds, the broker must notify the Commission within 15 business days. The same rule requires the broker to begin one of the settlement procedures set out in the Florida Statutes within 30 business days after the last demand, or after the broker forms a good-faith doubt.
The statute lists the procedures. A broker can request an escrow disbursement order from the Commission, submit the matter to arbitration with all parties’ consent, seek a court’s decision through interpleader or otherwise, or use mediation with every party’s written consent, which must be completed within 90 days after the last demand. Interpleader is a court action where the holder deposits the money with the court and asks the judge to decide who is entitled to it.
Here is what that means for you:
- The broker is on a clock and is not on your side. Expect a notice, not a ruling.
- Arbitration and mediation under the statute need everyone’s consent. If you refuse, the path usually shifts to the Commission’s order or the court.
- If the broker picks interpleader, you are in a lawsuit whether you planned to be or not, and you must respond by the court’s deadlines.
The shape is the same as under the contract: a menu of procedures, each with consent rules and deadlines. A response that arrives late can cost you the chance to shape the process.
Mistakes that cost people their deposits
- Giving notice by phone or text. Most contracts require written notice delivered in a particular way. Send formal notice even if you have talked to everyone already.
- Missing a contingency date by a day. Calendar every deadline from the contract’s effective date, not from the day you remember signing.
- Signing a release without reading it. Escrow holders often ask both parties to sign a joint instruction. Read what rights you are giving up before you sign.
- Ignoring the broker’s notice. A letter from a broker saying conflicting demands exist starts a deadline for them and often for you.
- Paying the deposit late. Under the FR/BAR contract, failing to pay the deposit on time is itself a buyer default.
- Arguing the facts but not the paper. Courts and arbitrators begin with the contract language. Emails about what you meant carry less weight.
What to gather before you talk to an attorney
A useful first meeting saves time and money. Bring:
- The signed contract with every addendum and amendment
- The escrow receipt or deposit confirmation, including the holder’s name and address
- All written demands, notices and replies, with dates and proof of delivery
- Inspection reports, loan denial letters, title commitments or survey results that support your position
- A short timeline of the deal, from signing to the day it fell through
With these in hand, an attorney can usually tell you quickly which side the contract favors and which procedure is most likely to apply.
How we approach deposit disputes
Most earnest money disputes we see a business owner worry about come down to a few pages of contract and a handful of dates. That is good news, because it means the outcome is often shaped before any lawsuit is filed.
Our practice covers real estate transactions and litigation, business litigation, and arbitration and mediation, so one firm can take a deposit dispute from the first demand letter through mediation, arbitration or court. Matthew Fornaro has more than 20 years of experience and our firm is AV® rated, and we bring that to small businesses and investors across South Florida who need practical, strategic advice.
Our advice is to treat the first ten days after conflicting demands as the most important stretch of the case. A clear written position, tied to the contract’s own paragraphs, gives you leverage in mediation and credibility if the matter reaches arbitration or a judge.
Matthew
Getting the deposit decision made your way
If you are in a deposit dispute, or you are about to sign a purchase contract and want the deposit and dispute terms to work for you, we can help. Our firm represents South Florida small businesses, startups and entrepreneurs in real estate transactions and litigation, including reviewing purchase contracts, responding to demands, and representing clients in mediation, arbitration or court.
If the dispute is part of a larger business conflict, our business litigation and arbitration and mediation services cover those too. For more on how these processes work, see our guide to how arbitration and mediation are changing Florida business disputes and our Florida real estate litigation FAQ.
FAQ
Do I always get my earnest money back in Florida?
No. It depends on the contract and who defaulted. Under the standard FR/BAR residential contract, a buyer default can let the seller keep the deposit as liquidated damages, while a seller default can let the buyer elect to get it back. A buyer who terminates properly under a contingency generally has a right to the deposit, so notice and timing matter.
Can the seller just keep the deposit?
Not on their own say-so if you dispute it. The seller’s contract right to the deposit arises on a buyer default, and the escrow holder usually will not release the money over your written objection. The dispute then moves through the contract’s settlement and mediation steps or the broker’s statutory procedures.
Who can hold the deposit in Florida?
The buyer and seller negotiate it. Commonly it is a broker, title company or attorney. If a title company or attorney holds it, the contract must list the holder’s name, address and telephone number. Brokers face specific timing rules for depositing the funds in escrow.
What happens if the escrow holder will not release the money?
The holder follows a defined process. For a broker, that means notifying the Florida Real Estate Commission within 15 business days of conflicting demands and starting a settlement procedure within 30 business days. Options include an escrow disbursement order, arbitration, mediation or a court action. Outside those steps, you and the other party can still settle.
Sources
- Escrow | Florida Realtors
- Residential Contract For Sale And Purchase (FR/BAR)
- CRSP-15 Preparation Manual, Florida Realtors
- Florida Real Estate: Dispute Resolution Explained, Florida Realtors
- Fla. Admin. Code R. 61J2-10.032: Notice Requirements
- 2025 Florida Statutes 475.25, Florida House of Representatives
