House Bill 871 amends Tennessee Code Annotated, Section 66-27-506, to clarify the use of escrow funds in condominium projects. The bill defines "actual costs" to include various construction-related expenses such as materials, labor, and fees directly associated with the development of the condominium. It stipulates that deposits made in connection with the purchase of a unit must be placed in escrow, with access to these funds allowed for the declarant only if a surety bond or an irrevocable letter of credit is provided to ensure repayment to the buyer if the unit is not delivered on time. The bill also outlines conditions under which the escrow funds can be disbursed, including delivery at closing, refunding to the purchaser, or interpleading into a court.

Additionally, the bill allows for deposits exceeding ten percent of the purchase price to be placed in a separate escrow account for actual costs incurred during construction, provided the purchase contract permits such use. It mandates that any contract allowing the use of deposits for construction purposes must be initialed by the buyer and include a specific disclosure in bold type. The act is set to take effect on July 1, 2025, and will apply to contracts or agreements entered into or amended after that date.

Statutes affected:
Introduced: 66-27-506