Parker Bill Lets Condo Developers Spend Your Escrow Deposit Early

The text as introduced · 469 words

89R8904 JBD-D

By: Parker
S.B. No. 1407

A BILL TO BE ENTITLED

AN ACT

relating to the withdrawal of certain deposits placed in escrow in

connection with the purchase or reservation of a condominium unit.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 82.158, Property Code, is amended to

read as follows:

Sec. 82.158. ESCROW OF DEPOSITS. (a) Except as provided by

Subsection (b), a [ A ] deposit made in connection with the purchase

or reservation of a unit from a declarant shall be placed in escrow

and held in this state in an account designated for that purpose by

a real estate broker, an attorney, a title insurance company

licensed in this state, an independent bonded escrow company, or an

institution whose accounts are insured by a governmental agency or

instrumentality until delivered to the declarant at closing,

delivered to the declarant because of the purchaser's default under

a contract to purchase the unit, or refunded to the purchaser.

Escrow deposits may be placed in interest-bearing accounts, and the

interest is payable as may be agreed in writing between the

declarant and the purchaser.

(b) If a contract to purchase a unit provides that the

deposit made in connection with the purchase or reservation of the

unit may be used for construction costs and the declarant obtains

and maintains a surety bond or insurance as described by Subsection

(c), the declarant may withdraw escrow funds when construction of

improvements begins. The funds may be used only for actual building

and construction costs of the project in which the unit is located.

(c) The bond or insurance required under Subsection (b) must

be issued by an insurer licensed in this state in favor of the

purchaser in an amount adequate to cover the amount of the deposit

to be withdrawn from escrow funds under Subsection (b). The

declarant may not withdraw an amount from the escrow funds greater

than the face amount of the bond or the insurance coverage amount.

The bond or insurance must be payable to the purchaser if the

purchaser obtains a final judgment against the declarant requiring

the declarant to return the deposit under the purchase agreement.

The bond or insurance may be either in the form of an individual

bond or policy for each deposit accepted by the declarant or in the

form of a blanket bond or policy assuring the return of all deposits

received by the declarant.

(d) The party holding escrow funds who releases any portion

of the funds to the declarant has no obligation to monitor the

progress of construction or the expenditure of the funds by the

declarant and is not liable to any purchaser for the release of

funds under this section.

SECTION 2. This Act takes effect September 1, 2025.