[§514B-92]  Use of purchaser deposits to pay
project costs.  (a)  Subject to the conditions set forth in subsection (b),
purchaser deposits that are held in escrow pursuant to a binding sales contract
may be disbursed before closing to pay for project construction costs,
including, in the case of a conversion, for repairs necessary to cure
violations of county zoning and building ordinances and codes, for
architectural, engineering, finance, and legal fees, and for other incidental
expenses of the project.



(b)  Disbursement of purchaser deposits prior
to closing shall be permitted only if:



(1)  The commission has issued an effective date for
the developer's public report for the project;



(2)  The developer has recorded the project's
declaration and bylaws; and



(3)  The developer has submitted to the commission:



(A)  A project budget showing all costs that
are required to be paid in order to complete the project, including lease
payments, real property taxes, construction costs, architectural, engineering and
legal fees, and financing costs;



(B)  Evidence satisfactory to the commission of
the availability of sufficient funds to pay all costs required to be paid in
order to complete the project, that may include purchaser funds, equity funds,
interim or permanent loan commitments, and other sources of funds; and



(C)  If purchaser funds are to be disbursed
prior to completion of construction of the project:



(i)  A copy of the executed construction
contract;



(ii)  A copy of the building permit for the project;
and



(iii)  Satisfactory evidence of security for the
completion of construction, which evidence may include the following, in forms
and content approved by the commission: a completion or performance bond issued
by a surety licensed in the State in an amount equal to one hundred per cent of
the cost of construction; a completion or performance bond issued by a material
house in an amount equal to one hundred per cent of the cost of construction;
an irrevocable letter of credit issued by a federally-insured financial
institution in an amount equal to one hundred per cent of the cost of
construction; or other substantially similar instrument or security approved by
the commission.  A completion or performance bond issued by a surety or by a
material house, an irrevocable letter of credit, and any alternatives shall
contain a provision that the commission shall be notified in writing before any
payment is made to beneficiaries of the bond.  Adequate disclosures shall be
made in the developer's public report concerning the developer's use of a
completion or performance bond issued by a material house instead of a surety,
and the impact of any restrictions on the developer's use of purchaser's funds.



(c)  A purchaser's deposits may be disbursed
prior to closing only to pay costs set forth in the project budget submitted
pursuant to subsection (b)(3)(A) that are approved for payment by the project
lender or an otherwise qualified, financially disinterested person.  In
addition, purchaser deposits may be disbursed prior to closing to pay
construction costs only in proportion to the valuation of the work completed by
the contractor, as certified by a licensed architect or engineer.



(d)  If purchaser deposits are to be disbursed
prior to closing, the following notice shall be prominently displayed in the
developer's public report for the project:



 



"Important
Notice Regarding Your Deposits:  Deposits that you make under your sales
contract for the purchase of the unit may be disbursed before closing of your
purchase to pay for project costs, construction costs, project architectural,
engineering, finance, and legal fees, and other incidental expenses of the
project.  While the developer has submitted satisfactory evidence that the
project should be completed, it is possible that the project may not be
completed.  If your deposits are disbursed to pay project costs and the project
is not completed, there is a risk that your deposits will not be refunded to
you.  You should carefully consider this risk in deciding whether to proceed
with your purchase."



 



[L 2005, c 93, pt of §4]