The $100,000 Deposit and the Expired Tail Clause

What is wrong is serious and comes before the dispute. Earnest money held by a broker is client money held in a fiduciary capacity. Depositing it into a general operating account - commingled with the firm's own funds, and potentially spent - exposes you to a trust-account violation, a licensing complaint, and personal liability if the firm's account is frozen, garnished, or the business fails. The fact that a signed purchase agreement directed the wiring there does not cure it; the parties cannot authorize you to mishandle trust funds. In many jurisdictions hold is also not permitted in a non-interest-bearing account without disclosure of who receives the benefit of float.

Now, immediately:

1. Confirm the $100,000 is intact. If any portion has been used, restore it from firm funds today, and document that.
2. Open a dedicated trust or escrow account and move the funds into it. Do not wait for the dispute to resolve.
3. Notify your E&O carrier in writing, and notify the seller and buyer's counsel in writing that the funds are held intact and will be disbursed only by written agreement of both parties or a court order.
4. Send both parties a short, factual status letter. Do not characterize who is right.

Going forward: a written escrow procedure, dual signatures on disbursement, reconciliation, a clause in every purchase agreement naming the escrow holder and specifying release mechanics, and - for larger deposits - a neutral third-party escrow or title company rather than the brokerage.

You do not decide. That is the core judgement. Holding the funds gives you power, not authority. Adjudicating who is right makes you a party to a fight you were not engaged to have, and whichever side loses will sue you for it.

Analyze the contract language first, because it may tell you who decides. 'Commercially reasonable efforts to obtain financing' is a soft standard - it does not guarantee a loan, and a bank decline following a Phase II environmental recommendation is, on its face, exactly the kind of event the clause contemplates. A buyer who genuinely applied and was genuinely declined likely has a contractual right to the return. The seller's assertion that the buyer 'never really applied' is a factual allegation that requires evidence: the loan application, the bank's written declination, correspondence, and the timing. Ask for it in writing.

Process:

1. Demand, in writing, that both sides state their position with supporting documents within a fixed period, say ten business days.
2. Review the purchase agreement's escrow and notice provisions, and any mediation or arbitration clause - many require mediation before litigation, and that is your exit.
3. If the facts clearly favor one side and both sides will sign a mutual written release, disburse on that signature. That is the clean path.
4. If either side will not sign, do not disburse. File an interpleader (or the jurisdiction's equivalent) naming both parties and deposit the funds with the court. It costs money and it is the correct move: it converts your exposure into a fee dispute rather than a $100,000 liability.

Do not release to the seller because he is your client and your commission depends on him. Do not release to the buyer to make the demand letter go away. Timing pressure from either side is a reason to slow down, not to choose.

Start with the clause itself - read it before you call anyone. A 12-month tail typically protects the broker where, within the stated period after expiration, the seller sells to a buyer the broker procured and whose name was registered with the seller during the term. Two things matter enormously: whether you gave written notice of the protected buyer during the listing term, and whether the tail period has run. If you never registered the buyer's name in writing, an enforceable tail is much harder to establish, and if 12 months have passed from expiration you likely have nothing. Sixty days after expiration is well inside a 12-month tail, so the timing works - if the paperwork does.

Next, causation. You introduced the buyer; the new broker brought the same buyer. The seller will argue the new broker's efforts caused the sale, or that the buyer returned independently. Pull your file: the introduction date, the NDA, the CIM version sent, showing activity, any offer, and the buyer's identity. Procurement is the question, and documentation answers it.

Is the seller liable to pay twice? Usually not. Most tail clauses require the seller to pay the original broker's commission if the protected buyer closes, often with a credit for amounts paid to a cooperating broker. That means the realistic claim is your 8% ($108,000), less whatever is paid to the new broker, or a negotiated split.

How to pursue it:

• Send a written demand to the seller with the tail clause quoted and the registration evidence attached, and copy the new broker. Do not contact the buyer directly; that risks a tortious interference claim and jeopardizes the closing.
• Offer a co-broke split with the new broker - a three-way conversation where the seller pays one commission and the two brokers divide it is far more likely to close than a fight.
• If the seller refuses, mediation before litigation; the listing agreement likely requires it.

The lesson for the file: register protected buyers in writing, with dates, during the term. A tail clause is only as good as the paper behind it.