Bill > HB0871

This bill amends Tennessee law regarding escrow funds for condominium projects by establishing new rules for how deposits made by potential buyers can be handled by declarants (developers). Under the new provisions, the first 10% of a unit's purchase price must be placed in an escrow account in Tennessee, and the declarant can only access these funds before or during construction if they provide either a surety bond or an irrevocable letter of credit that guarantees the buyer's potential financial protection. Deposits can be released from escrow under specific conditions, such as closing the sale, buyer default, refund, or court order. For deposits exceeding 10% of the purchase price, declarants may use the funds for actual construction costs, but not for salaries, commissions, or advertising, provided the purchase contract explicitly allows this and includes a specific warning statement in bold or capital letters. The bill also clarifies that third-party lenders are not liable for deposit usage unless they take ownership of the project through foreclosure. These changes aim to provide more financial transparency and protection for condominium buyers by regulating how their initial deposits can be used during the development process. The law will take effect on July 1, 2025, and will apply to contracts entered into or amended on or after that date.

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https://wapp.capitol.tn.gov/apps/Billinfo/default.aspx?BillNumber=HB0871&ga=114