§35-8A-410. Escrow of deposits.

(a) Except as provided in subsection (b), any deposit made in connection with the purchase or reservation of a unit from a person required to deliver an offering statement pursuant to Section 35-8A-402(c) shall be placed in escrow and held either in this state or in the state where the unit is located in an account designated solely for that purpose by a licensed title insurance company, an attorney, a licensed real estate broker, or an institution whose accounts are insured by a governmental agency or instrumentality until (i) delivered to the declarant at closing; (ii) delivered to the declarant because of purchaser's default under a contract to purchase the unit; or (iii) refunded to the purchaser. Except as provided in subsection (b) and as otherwise provided herein, the funds representing the deposit shall be held in an interest bearing account and the interest shall belong to the party entitled to the principal deposit. Notwithstanding anything in this subsection to the contrary, funds deposited pursuant to a reservation agreement that provides the prospective buyer is not bound to purchase a unit and that the prospective buyer may choose to have the deposit returned to him or her, need not bear interest unless the reservation agreement specifically states that the deposit will bear interest.

(b) Notwithstanding subsection (a), if the time period during which a purchaser may cancel an agreement to purchase a unit pursuant to Section 35-8A-408 has expired without the purchaser's having exercised the right to cancel and construction of the project in which the unit is located is not substantially completed, if the purchase contract between the declarant and the purchaser so provides, and if the declarant has acquired the land on which the condominium will be built, the declarant may do either of the following: (1) Withdraw deposited funds in excess of 10 percent of the purchase price from the escrow account for use in the actual construction and development of the condominium project provided at least 10 percent of the purchase price remains on deposit after any withdrawals, or (2) after the declarant has caused a bond to be issued by a surety insurer licensed in this state in favor of the purchaser, withdraw deposited funds from the escrow account for use in the actual construction and development of the condominium. The declarant may not withdraw more than the face amount of the bond. The bond shall name the purchaser as the beneficiary thereof and shall be payable to the purchaser if the purchaser obtains a final judgment against declarant requiring the declarant to return the deposit to the purchaser pursuant to the purchase contract. The declarant may satisfy this bond requirement by causing one or more blanket bonds to be issued in favor of all purchasers whose deposited funds may be used pursuant to this subsection. In the event of a withdrawal pursuant to this subsection, the withdrawn funds need not bear interest and the declarant shall not owe the purchaser interest on any withdrawn funds if the purchase contract provides that interest on withdrawn funds will not accrue or be owed. However, no part of these funds may be used for salaries, commissions, or expenses of salespersons or for advertising purposes. A purchase contract that permits use of deposits for these purposes shall include the following legend conspicuously printed or stamped in boldfaced type on the first page of the contract and immediately above the place for the signature of the purchaser: ANY DEPOSIT MAY BE USED FOR CONSTRUCTION PURPOSES BY DECLARANT. Additionally, an offering statement given to a prospective purchaser whose deposit may be used as provided in this subsection shall contain the same legend, which may be contained within the body of the offering statement. In determining whether more than 10 percent of the purchase price has been deposited, the face amount of any letter of credit accepted by declarant as part of the deposit shall be considered.

(Acts 1990, No. 90-551, p. 858, §4-110; Act 2005-300, 1st Sp. Sess., §1.)