Update: The Ohio Good Funds Law
Ohio’s Good Funds law, amended in September 2017, has had some effects on the way real estate transactions are concluded. The purpose of the law is to protect funds that are held and disbursed in a real estate transaction against fraud. The law governs “disbursing from an escrow account” and aims to preserve the integrity of the funds. The most obvious is the need for wire transfers of funds in excess of $10,000.
Title agents are required to abide by stricter controls over the handling of escrow and closing funds for all transactions. It applies to residential real estate transactions, but some title companies have opted to apply these requirements to commercial transactions as well.
The Ohio Good Funds Law requires that before a disbursement from an escrow account may be made, the following conditions be met:
- The funds have been transferred electronically to or deposited into the escrow account of the escrow or closing agent and are immediately available for withdrawal and disbursement. [Note that if the funds are initiated by the United States, State of Ohio or by an agency, instrumentality or political subdivision of either, they may be in the form of a check or electronic automated clearing house system and must be deposited into the account of the agent and be immediately available for withdrawal by the agent prior to disbursement];
- If the funds are in an aggregate amount of $10,000 or less, the funds may be cash, personal checks, business checks, certified checks, cashier’s checks, official checks or money orders, as long as they are drawn on an existing account at a federally insured bank, savings and loan association, credit union or savings bank. These types of funds must have been physically received by the agent prior to disbursement and are intended for deposit no later than the next banking day after the date of disbursement; or
- If funds are drawn on a real estate broker’s trust account, as described in Ohio Revised Code 4735.18(A)(26), they may be in the form of a business check.
The law applies to buyers, sellers, and lenders. While these controls may result in transactional inefficiencies and inconvenience for the parties involved with the real estate transaction, the purpose is to create greater security and guard against fraudulent activity. Real estate transactions will now require more advanced planning and coordination to avoid delays in disbursement, so funds may be delivered in a timely manner. For example, additional time may be necessary for funds to clear in instances where funds from one closing are needed for a second closing.
Should you have any questions about this or a particular real estate transaction, please contact one of our real estate attorneys.
Disclaimer: The article in this publication has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.