Substitute House Bill No. 7027 proposes significant amendments to the handling of condominium deposits, allowing developers, referred to as "declarants," to utilize these funds for actual construction costs rather than keeping them in escrow as currently required by law. The bill introduces new legal language defining "actual costs" to include various construction-related expenses while explicitly excluding sales and marketing costs. It modifies the conditions under which deposits can be released from escrow, permitting withdrawals exceeding 1% of the purchase price for construction purposes if the sale contract includes this provision and the purchaser is an accredited investor. Additionally, any purchase agreement that allows for the use of deposits for construction must include a clear disclosure of this possibility.

The bill also repeals existing statutes that mandate deposits be held in escrow until closing or refunded, thereby expanding the options available to developers. It clarifies the distribution of interest accrued on deposits held in escrow, ensuring fair division between the purchaser and the declarant under specified conditions. Furthermore, it stipulates that deposits for units with building permits issued after June 1, 2025, must still be held in escrow, which may create a conflict with the new provisions. The effective date for the bill is set for July 1, 2025.

Statutes affected:
Raised Bill: 47-271
HSG Joint Favorable: 47-271
File No. 239: 47-271