House Bill 871 amends Tennessee Code Annotated, Section 66-27-506, to establish new regulations regarding the use of escrow funds for condominium projects. The bill specifies that deposits made in connection with the purchase of a unit from a declarant must be placed in escrow, with the first ten percent (10%) of the purchase price held in a designated account. The declarant can access these funds prior to the commencement of construction 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. Additionally, the bill outlines conditions under which the escrow funds can be disbursed, including delivery at closing, refunding to the purchaser, or interpleading into a court.

Furthermore, the bill allows for deposits exceeding ten percent (10%) of the purchase price to be placed in a separate escrow account for actual construction costs, provided the purchase contract permits such use. It also mandates that any contract allowing the use of deposits for construction purposes must include a specific disclosure in bold type, informing buyers of the potential use of their deposits. The act is set to take effect on July 1, 2025, and will apply to contracts or agreements entered into or amended on or after that date.

Statutes affected:
Introduced: 66-27-506