The Ohio Good Funds Law
The goal of Ohio’s Good Funds legislation is to protect consumer funds that are held and disbursed in a real estate transaction against fraud. In response to the growing trend of email compromise schemes and cyber fraud, an amendment to the Ohio Good Funds Law has been passed (Ohio Revised Code 1349.21). The new law governing “disbursing from an escrow account” will be effective April 6, 2017, and aims to preserve the integrity of the consumer’s funds.
Once this new law takes effect, title agents will be required to abide by stricter controls over the handling of escrow and closing funds for all transactions closing on or after April 6, 2017. The revised Ohio Good Funds Law requires that before a disbursement from an escrow account may be made, the following conditions must 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 $1,000 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 ORC 4735.8(A)(26), they may be in the form of a business check.
While these controls may result in business inefficiencies for service providers and inconvenience for the parties involved with the real estate transaction, the purpose is to protect consumers and will create greater security. That said, 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.
If you have questions, 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.