Florida Statutes 501.1375 – Deposits received for purchase of residential dwelling units; placement in escrow; waiver; exceptions
Current as of: 2024 | Check for updates
|
Other versions
(1) DEFINITIONS.–
For details, see Fla. Stat. § 775.082(3)(e)
(a) “Building contractor” means any person who, for compensation, constructs and sells one-family or two-family residential dwelling units, except for a person who sells or constructs less than 10 units per year statewide.
Attorney's Note
Under the Florida Statutes, punishments for crimes depend on the classification. In the case of this section:| Class | Prison | Fine |
|---|---|---|
| Felony of the third degree | up to 5 years | up to $5,000 |
Terms Used In Florida Statutes 501.1375
- Affidavit: A written statement of facts confirmed by the oath of the party making it, before a notary or officer having authority to administer oaths.
- Contract: A legal written agreement that becomes binding when signed.
- Department: means the Department of Legal Affairs. See Florida Statutes 501.203
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Grantor: The person who establishes a trust and places property into it.
- Lien: A claim against real or personal property in satisfaction of a debt.
- Litigation: A case, controversy, or lawsuit. Participants (plaintiffs and defendants) in lawsuits are called litigants.
- Order: means a cease and desist order issued by the enforcing authority as set forth in…. See Florida Statutes 501.203
- person: includes individuals, children, firms, associations, joint adventures, partnerships, estates, trusts, business trusts, syndicates, fiduciaries, corporations, and all other groups or combinations. See Florida Statutes 1.01
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- writing: includes handwriting, printing, typewriting, and all other methods and means of forming letters and characters upon paper, stone, wood, or other materials. See Florida Statutes 1.01
(b) “Developer” means either a building contractor who offers new residential dwelling units for sale or any person who offers a new one-family or two-family residential dwelling unit for sale, except for a person who sells or constructs less than 10 units per year statewide.
(c) “Closing” means that point in time at which legal title to the real property shall transfer from grantor thereof to grantee.
(d) “Default” means the failure of the buyer to close the transaction after issuance of the certificate of occupancy or the failure of the buyer to comply with any of the buyer’s obligations under the terms of the purchase contract.
(e) “Escrow” or “to place in escrow” means the delivery to or deposit with a third party, the escrow holder, of money or documents to be held and disbursed by such escrow agent consistent with the provisions of this section.
(2) NOTICE TO BUYER OF RIGHT TO HAVE DEPOSIT FUNDS PLACED IN ESCROW ACCOUNT.–In all offers to purchase, sales agreements, or written contracts made between a building contractor or a developer and a prospective buyer of a one-family or two-family residential dwelling unit, the building contractor or developer shall notify the prospective buyer that any deposit (up to 10 percent of the purchase price) made by the buyer to the building contractor or developer shall, unless waived in writing by the buyer, be deposited in an escrow account with a savings and loan association, bank, or trust company, an attorney who is a member of The Florida Bar, a licensed Florida real estate broker, or a title insurance company authorized to insure title to real property in this state. The funds, if escrowed, may be deposited in separate accounts or commingled with other escrow or trust accounts. Any such offer, agreement, or contract used by the building contractor or developer with respect to the sale of a one-family or two-family residential dwelling unit shall contain the following legend in conspicuous type: THE BUYER OF A ONE-FAMILY OR TWO-FAMILY RESIDENTIAL DWELLING UNIT HAS THE RIGHT TO HAVE ALL DEPOSIT FUNDS (UP TO 10 PERCENT OF THE PURCHASE PRICE) DEPOSITED IN AN ESCROW ACCOUNT. THIS RIGHT MAY BE WAIVED, IN WRITING, BY THE BUYER.
(3) ESCROW ACCOUNTS; WITHDRAWALS.–If the buyer of a one-family or two-family residential dwelling unit does not waive the right to have deposits placed in an escrow account, the building contractor or developer shall place the funds (up to 10 percent of the purchase price) in an escrow account. The account shall be clearly denoted on the records of the escrow holder as an escrow account. All withdrawals from the account shall require the signatures of both the building contractor or developer and the buyer or the buyer’s agent, except as provided in this section.
(4) RIGHT TO INTEREST; USE OF ESCROWED FUNDS; SURETY BOND OR LOAN.–When money has been placed in an escrow account pursuant to this section, the building contractor or developer shall be entitled to any interest accrued by the account, payable at closing. When the building contractor or developer desires to use escrowed funds for building purposes, after notification to the buyer, the building contractor or developer shall acquire a surety bond issued by a company licensed to do business in this state, if such a bond is readily available in the open market, payable to the buyer in the amount of the escrow deposit; and the funds in the escrow deposit shall thereafter be released to the building contractor or developer for construction purposes only. In the case where no surety bond is available, the building contractor or developer may borrow money in an amount equal to the funds held in escrow for construction purposes only, in which case any interest which the building contractor or developer pays on such a loan for a period not to exceed 12 months shall be paid by the buyer at the time of closing, but the buyer shall be credited for any interest accrued on the escrow account.
(5) MASTER SURETY BOND.–In lieu of and as an alternative to the requirements of subsection (4), a blanket or master surety bond issued by a company licensed to do business in this state may be acquired by the builder or developer, in an amount equal to or greater than the total amount of escrow deposits withdrawn by the builder or developer pursuant to this section. The buyer shall be debited at closing in an amount equal to the premium for the applicable portion of the bond securing his or her deposit. The master surety bond amount and the pro rata share of bond premium debited against the buyer may be based on a reasonable projection of annual escrowed deposit amounts which will be withdrawn pursuant to this section. Bond rates charged under this subsection shall be subject to the provisions of part I of chapter 627 of the Florida Insurance Code.
(6) ACCOUNTABILITY OF ESCROW HOLDER FOR USE OF ESCROWED FUNDS.–No escrow holder, bonding company, or lending institution referred to in this section shall be chargeable with the use to which a builder or developer puts escrowed funds.
(7) RELEASE OF DEPOSIT MONEYS.–Funds in an escrow account established pursuant to this section shall be released without the signature of both the building contractor or developer and the buyer only under the following conditions:
(a) Pursuant to subsection (4).
(b) Pursuant to subsection (5).
(c) If the buyer properly terminates the contract pursuant to its terms, the funds, including any accrued interest, shall be paid to the buyer.
(d) If the buyer defaults in the performance of his or her obligations under the contract of purchase and sale, the funds shall be paid to the building contractor or developer together with any interest earned, in the following manner: The builder or developer may, upon default of the buyer to comply with the terms and conditions of the written contract between the parties, and if the builder or developer is not in default, withdraw any funds being held in escrow pursuant to said written agreement. In order to make such withdrawal, the builder or developer shall send written notice by certified mail to the buyer of his or her intention to make said withdrawals at least 72 hours prior to the intended time of withdrawal. After this 72-hour period, the builder or developer, upon presentation to the escrow holder of a withdrawal slip and the passbook, if any, together with an affidavit certifying that the buyer is in default and that the builder or developer is not in default, may withdraw the escrowed funds. The escrow holder, upon receipt of these items, shall release the funds to the builder or developer. The escrow holder shall not be liable for the release of the funds pursuant to this subsection.
(e) If the funds of the buyer have not been previously disbursed in accordance with this subsection, they shall be disbursed to the building contractor or developer at the closing of the transaction.
(8) NO RIGHT OF LIEN, SUBROGATION, OR CLAIM.–
(a) An escrow deposit or surety bond purchased pursuant to this section shall not be subject to any lien pursuant to part I of chapter 713 or any lien of any lending institution (except if contracted for by the buyer) or subrogation in the case of default.
(b) In the event that closing occurs with respect to a sale under this section, the buyer shall then have no right to place a claim on any escrowed funds for breach of contract.
(9) PENALTIES.–Any developer who willfully fails to comply with the provisions of this section concerning establishment of an escrow account, deposits of funds into escrow, or withdrawal of funds from escrow commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084. The failure to place funds in an escrow account, if required by this section, within 10 days after receipt by the developer of such funds is prima facie evidence of a violation of this section.
(10) CIVIL ACTIONS.–In the event of any civil litigation arising under this section, the prevailing party shall be entitled to attorney’s fees and costs. Any escrow account interest shall continue to accrue to the benefit of the building contractor or developer on said escrow account during the pendency of any such litigation, except in the event of a ruling adverse to the building contractor or developer.
(11) STATE STANDARDS.–The provisions of this section constitute maximum statewide standards.
(12) EXEMPTIONS.–This section shall not apply to deposits, as described in this section, which are:
(a) Placed in an escrow account required by the Federal Housing Administration or the United States Department of Veterans Affairs; or
(b) Made to licensed real estate brokers pursuant to this section, which shall instead be deposited in accordance with the provisions of chapter 475.