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How does an interpleader work?

Understanding Interpleader Actions: A Guide for Real Estate Brokers

October 27, 2017 | Response By John M. Jorgensen


After the broker holding a deposit has notified FREC of the conflict, he or she has four remedies. An interpleader action is one of those remedies. An interpleader action is a lawsuit that is filed in county or circuit court in the jurisdiction where the escrowed funds are located. The broker is the Plaintiff in the suit and names both the buyer and seller as Defendants. The interpleader states the facts of the case and requests that the court permit the broker to deposit the escrowed funds into the registry of the court.

Often the buyer and seller will file cross claims against each other. Once the buyer and seller answer the interpleader action and file their claims, the broker then can file a motion with the court requesting that the court accept the escrowed funds. Usually the court will enter an order granting the broker’s motion and the escrowed funds are transferred to the court. Once this occurs, the broker’s involvement in the action ceases and the buyer and seller can fight over the deposit in court.

Both the common law on interpleader and the FAR/BAR contract provide that the broker as escrow agent is entitled to collect attorney’s fees and costs. These fees are paid from the escrowed funds and ultimately charged as court costs in favor of the prevailing party whether it is the buyer or seller.

If the buyer or seller brings suit before the broker has filed an interpleader action, then the broker can intervene in the suit and file a motion to interplead the funds into the registry of the court. Likewise, if the real estate broker is named in the lawsuit, the appropriate pleadings must be filed with the court enabling the broker to interplead the funds. Ordinarily, it should take two or three months for the broker’s portion of the interpleader action to be completed.
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