The developer shall comply with the following escrow requirements:
(a)
A developer of a time-share plan shall deposit into an escrow account in an acceptable escrow depository 100 percent of all funds that are received during the purchaser’s rescission period. An acceptable escrow depository includes, when qualified to do business in this state, escrow agents licensed by the Commissioner of Corporations, banks, trust companies, savings and loan associations, title insurers,
and underwritten title companies. The deposit of these funds shall be evidenced by an executed escrow agreement between the escrow agent and the developer, that shall include provisions that state the following:
(1)
Funds may be disbursed to the developer by the escrow agent from the escrow account only after expiration of the purchaser’s rescission period and in accordance with the purchase contract, subject to subdivision (b).
(2)
If a prospective purchaser properly cancels the purchase contract pursuant to its terms, the funds shall be paid to the prospective purchaser or paid to the developer if the prospective purchaser’s funds have been previously refunded by the developer.
(b)
If a developer contracts to sell a time-share interest and the construction of any property in which the time-share interest is located
has not been completed, the developer, upon expiration of the rescission period, shall continue to maintain in an escrow account all funds received by or on behalf of the developer from the prospective purchaser under his or her purchase contract. The commissioner shall establish, by regulation, the types of documentation which shall be required for evidence of completion, including, but not limited to, a certificate of occupancy, a certificate of substantial completion, or an inspection by the State Fire Marshal designee or an equivalent public safety inspection agency in the applicable jurisdiction. Unless the developer submits financial assurances, in accordance with subdivision (c), funds shall not be released from escrow until a certificate of occupancy, or its equivalent, has been obtained and the rescission period has passed, and the time-share interest can be transferred free and clear of blanket encumbrances, including mechanics’ liens. Funds to be released from escrow shall be released as
follows:
(1)
If a prospective purchaser properly cancels the purchase contract pursuant to its terms, the funds shall be paid to the prospective purchaser or paid to the developer if the prospective purchaser’s funds have been previously refunded by the developer.
(2)
If a prospective purchaser defaults in the performance of the prospective purchaser’s obligations under the purchase contract, the funds shall be paid to the developer.
(3)
If the funds of a prospective purchaser have not been previously disbursed in accordance with the provisions of this subdivision, they may be disbursed to the developer by the escrow agent upon the issuance of acceptable evidence of completion of construction.
(c)
In lieu of the provisions in subdivisions (a) and (b),
the commissioner may accept from the developer a surety bond, escrow bond, irrevocable letter of credit, or other financial assurance or arrangement acceptable to the commissioner. Any acceptable financial assurance shall be in an amount equal to or in excess of the lesser of (1) the funds that would otherwise be placed in escrow, or (2) in an amount equal to the cost to complete the incomplete property in which the time-share interest is located. However, in no event shall the amount be less than the amount of funds that would otherwise be placed in escrow pursuant to paragraph (1) of subdivision (a).
(d)
The developer shall provide escrow account information to the commissioner and shall execute in writing an authorization consenting to an audit or examination of the account by the commissioner on forms provided by the commissioner. The developer shall comply with the reconciliation and records requirements established by regulation by the
commissioner. The developer shall make documents related to the escrow account or escrow obligation available to the commissioner upon the department’s request. The escrow agent shall maintain any disputed funds in the escrow account until either of the following occurs:
(1)
Receipt of written direction agreed to by signature of all parties.
(2)
Deposit of the funds with a court of competent jurisdiction in which a civil action regarding the funds has been filed.