Earnest money return clarification
On April 3, 2017
By Peg Ritenour, OAR Vice President of Legal Services/Administration
Ohio House Bill 532 — which becomes effective on April 6 — includes an amendment to the Ohio Revised Code section concerning the return of earnest money that has caused some confusion.
Under current Ohio law, if a transaction fails to close, the earnest money can only be released pursuant to an agreement signed by both the buyer and seller or a court order indicating how the funds shall be disbursed. HB 532 clarifies that the written agreement between the parties must be in a separate document, such as a release.
This has raised concern about whether it is still permissible to have language in a purchase agreement that provides that the earnest money will be automatically returned to the buyer after two years if the parties do not provide the broker with written instructions signed by both parties regarding the disbursement of the earnest money or notification that legal action has been filed. The Ohio Revised Code section of the license law that allows for this language and process was not changed in HB 532. I have confirmed with the Superintendent that this clause and procedure is still valid. Therefore, there is no need to remove this language from your purchase contract.
More information, including commonly asked questions about HB 532, are available by clicking here.