Robert R. Rowley PS

Attorney at Law

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New Washington Residential Earnest Money Statute (effective July 24, 2015)

The Washington Legislature has passed and the Governor has signed a new law concerning the disposition of earnest money (EM) in a failed transaction.  This law will go into effect on July 24, 2015, and will apply to EM deposits still held in escrow on that date as well as deposits made after the effective date.


Be aware that the law only applies to earnest money and not other funds that may be held in escrow and that the law only applies to residential property – improved or vacant.

Options are limited by the new law.

If escrow receives a written demand from a party to a transaction for all or a portion of the EM, it has three options under the new law –

  1. Release the EM as demanded (which may subject escrow to liability); or
  2. Commence an interpleader court action; or
  3. Send a notification of the demand as described below to all of the other buyers and sellers.

Notification of Receipt of Demand for Earnest Money.

  1. Notice of the demand must be sent to all other buyers and sellers within 15 calendar days of receiving the written demand. Click below for a sample Notice of Demand which you may use or revise.


  1. The notice must be in writing.
  2. The notice must be sent by U.S. Mail to the last known mailing address and by email to the last known email address. In ascertaining the “last known” addresses, escrow is not required to search further than its own file concerning the transaction.
  3. The notice must include a copy of the written demand.
  4. The notice must advise the parties that they have 20 calendar days from the date the notice was placed in the mail (and the email transmitted) to provide a written objection to the release of the EM or the money will be released to the demanding party.
  5. The notice must specify an address (escrow’s address) where written objections must be sent.

If objection is received within 20 days.

If a written objection or inconsistent demand from one or more of the parties is received at the specified address within the 20 day period described above, escrow –

  1. must not release the funds to any party; and
  2. must commence an interpleader action within 60 calendar days of the receipt of the objection or inconsistent instructions; unless
  3. the parties provide subsequent consistent instructions to (a) disburse the EM or (b) refrain from commencing an interpleader action for a specified period of time.

If objection is not received within 20 days.

If a written objection or inconsistent demand from one or more of the parties is not received at the specified address within the 20 day period described above, escrow must, within 10 calendar days of the expiration of the 20 day period, deliver the EM to the demanding party in accordance with the party’s written demand.

New rules for filing interpleader actions.

Escrow may commence an interpleader action at any time prior to the expiration of the 20 day period described above.  If a written objection or inconsistent instruction is received prior to the expiration of the 20 day period, escrow is required to commence an interpleader suit as noted above.

An interpleader is a lawsuit to determine the ownership of property (the EM) held by a disinterested third party (escrow).  Normally the suit is filed by the plaintiff (escrow) in state court (District or Superior Court) naming those that may have an interest in the EM as defendants (the buyers and sellers).  At the time of filing, the disputed funds are deposited with the court (a check made payable to the Clerk of _______ Court).  It should be noted that small claims courts will not accept interpleader suits.

The new statutes have added some rules that are specific to those interpleader suits that concern the ownership of earnest money deposits.

  1. There is provided in the new statues acceptable Summons and Complaint forms (see pages 3-5) of the copy of the new).
  2. The new statutes allow service of process by mailing a copy of the summons and the complaint “by first-class mail, postage prepaid, to the party to be served at his or her usual mailing address or the address identified for that party in the real estate purchase and sale agreement.”
  3. If escrow commences an interpleader action, the court must aware escrow its reasonable attorneys’ fees and costs.