







When buying or selling a home in Massachusetts, the deposit is a critical part of the transaction. Often, deposits are held by the listing broker in their escrow account. However, in some transactions, the Seller’s attorney holds the deposit in a special trust account. This blog will explain how deposits are managed when held by the Seller’s attorney, with a focus on the role of Interest on Lawyers’ Trust Accounts (IOLTA) in protecting those funds.
Deposits and IOLTA Accounts
In Massachusetts, real estate deposits held by attorneys are typically placed in an Interest on Lawyers’ Trust Account (IOLTA). These accounts are specifically designed to safeguard client funds and are governed by the Massachusetts Rules of Professional Conduct.
Why Use an IOLTA Account?
- Safety: Deposits are held securely in a separate account, ensuring they are not commingled with the attorney’s operating funds.
- Transparency: IOLTA accounts are subject to rigorous recordkeeping and oversight requirements, providing clarity and accountability.
- Public Benefit: The interest earned on IOLTA accounts is directed to fund legal aid programs, helping to provide access to justice for those in need.
What Happens to Your Deposit When Held by the Seller’s Attorney?
- At Signing: Once the Purchase and Sale Agreement is signed, the buyer’s deposit is transferred to the Seller’s attorney’s IOLTA account.
- Before Closing: The deposit remains securely in the IOLTA account until the closing, when it is applied to the purchase price.
- In the Event of a Dispute: If the transaction falls through or a dispute arises, the funds remain in the IOLTA account until the issue is resolved.
The Importance of Proper Handling
Proper handling of deposits by attorneys ensures:
- Security: The funds are protected and kept separate from other accounts.
- Neutrality: The attorney serves as a neutral third party, ensuring fair treatment for both buyers and sellers.
- Transparency: Detailed records of all transactions are maintained, providing peace of mind to all parties involved.
Improper handling of these funds can result in serious professional consequences for attorneys, which is why the use of IOLTA accounts is standard practice in Massachusetts.
What Happens During a Dispute?
Disputes over deposits can occur if either party fails to fulfill the terms of the Purchase and Sale Agreement. In such cases:
- The funds remain in the IOLTA account until the dispute is resolved.
- Neither the buyer nor the seller can access the funds without mutual agreement or a court order.
- Often, alternative dispute resolution strategies including arbitration are used to avoid the time and expense of litigation.
- This ensures the deposit is handled fairly and protects both parties’ interests.
Why Work with an Experienced Real Estate Attorney?
Deposits are just one aspect of a real estate transaction, but managing them correctly is crucial to avoiding complications. An experienced attorney ensures:
- Your rights and interests are protected throughout the process.
- The deposit is handled according to legal and ethical standards.
- Any disputes are resolved efficiently and professionally.
Whether you’re a buyer or a seller, having a knowledgeable real estate attorney on your side can help you navigate the complexities of the transaction with confidence.
Start Your Real Estate Journey with Confidence
Understanding how deposits are managed—especially when held by the Seller’s attorney—is essential for a smooth and successful real estate transaction. If you have questions about your deposit or any other aspect of the buying or selling process, we’re here to help. Contact us today to learn more about how we can support you.
Sources for further reading:
- Massachusetts Rules of Professional Conduct Rule 1.15: Safekeeping Property
- Massachusetts Board of Bar Overseers: IOLTA Resources
Real Estate Bar Association for Massachusetts: Disputes Over Deposits