§ 66-32-113 — Escrow of deposits

Tennessee § 66-32-113

• Jurisdiction: Tennessee
• Title: 66

Text

(a) (1) A developer of a time-share program shall deposit into an escrow account established and held in this state, in an account designated solely for the purpose, by an independent bonded escrow company, or in an institution whose accounts are insured, a governmental agency or instrumentality, one hundred percent (100%) of all funds which are received during the purchaser's cancellation period provided for in this part. The deposit of such funds shall be evidenced by an executed escrow agreement between the escrow agent and the developer, which shall include that: (A) Its purpose is to protect the purchaser's right to a refund if the purchaser cancels the sales agreement for a time-share interval within the cancellation period; (B) Funds may be disbursed to the developer by the escrow agent from the escrow account only after expiration of the purchaser's cancellation period and in accordance with the sales agreement; (C) The escrow agent may release funds to the developer from the escrow account only after receipt of a sworn statement from the developer that no cancellation notice was received before expiration of the cancellation period; and (D) If a buyer properly terminates the contract pursuant to its terms or pursuant to this part, the funds shall be paid to the buyer together with any interest earned, all as provided in § 66-32-114(a) . (2) Funds so deposited may be invested by the escrow agent in securities of the United States or any agency thereof or in savings or time deposits in institutions insured by an agency of the United States. (b) If a developer contracts to sell a time-share estate and the construction, furnishings, and landscaping of the property submitted to time-share ownership have not been substantially completed in accordance with the plans and specifications and representations made by the developer in the disclosures required by this part, the developer shall immediately pay into an escrow account established and held in this state, in an account designated solely for the purpose, by an independent bonded escrow company, or in an institution whose accounts are insured, a governmental agency or instrumentality, all payments received by or on behalf of the developer from the buyer on a contract of purchase. The escrow agent may invest the escrow funds in securities of the United States or any agency thereof or in savings or time deposits in institutions insured by an agency of the United States. Funds shall be released from escrow as follows: (1) If a buyer properly terminates the contract pursuant to its terms or pursuant to this part, the funds shall be paid to the buyer, together with any interest earned; (2) If the buyer defaults in the performance of the buyer's obligations under the contract of purchase and sale, the funds shall be paid to the developer, together with any interest earned; or (3) If the funds of a buyer have not been previously disbursed in accordance with this subsection (b), they may be disbursed to the developer by the escrow agent at the closing of the transaction, unless prior to the disbursement the escrow agent received from the buyer written notice of a dispute between the buyer and developer. If the money remains in this account for more than three (3) months and earns interest, the interest shall be paid as provided in this subsection (b). (c) For the purpose of this section, "substantially completed" means that all amenities, furnishings, appliances and structural components and mechanical systems of buildings are completed and provided as represented in the public offering statement and that the premises are ready for occupancy and the proper governmental authority has caused to be issued a certificate of occupancy. (d) (1) In lieu of the provisions in subsection (b), a developer may withdraw, after the initial rescission period for cancellation has expired, all payments received by the developer from the buyer toward the sales price, provided: (A) The developer, prior to withdrawal of any funds, posts a surety bond, irrevocable letter of credit or other financial assurances acceptable to the commission in an amount equal to one hundred twenty-five percent (125%) of the cost to complete the time-share project. The developer shall be required to submit such cost and financial data as the commission may reasonably require; or (B) The developer has obtained protection for nondefaulting purchasers in compliance with § 66-32-128 , and has obtained a final and binding commitment letter on the construction of the project and a final and binding commitment letter on the financing of the same construction. A bond obtained pursuant to subdivision (d)(1)(A) shall be executed by the seller as principal and by a surety company authorized to do business in this state as surety. The bond shall be conditioned upon the faithful compliance of the seller with this part including substantial completion, as defined in subsection (c), of the project and unit and compliance with the contract of purchase. (2) Payments so withdrawn pursuant to this subsection (d) may be used only to pay for construction costs of the improvements comprising the time-share project. (e) In lieu of any escrows required by this section, the commission shall have the discretion to accept other financial assurances including, but not limited to, a performance bond or an irrevocable letter of credit in an amount at least equal to or in excess of the cost to complete the time-share project.

Legislative History

Acts 1981, ch. 372, § 14; T.C.A., § 64-3214; Acts 1982, ch. 753, § 1; 1983, ch. 210, § 4; 1985, ch. 98, §§ 2-4.