Virginia Code 55.1-1983: Escrow of deposits
A. Any deposit made in regard to any disposition of a unit, including a nonbinding reservation agreement, shall be held in escrow until delivered at settlement. Such escrow funds shall be deposited in a separate account designated for this purpose that is federally insured and located in the Commonwealth, except where such deposits are being held by a real estate broker or attorney licensed under the laws of the Commonwealth, in which case such funds may be placed in that broker’s or attorney’s regular escrow account and need not be placed in a separate designated account. Such escrow funds shall not be subject to attachment by the creditors of either the purchaser or the declarant.
Terms Used In Virginia Code 55.1-1983
- Attachment: A procedure by which a person's property is seized to pay judgments levied by the court.
- Condominium: means real property, and any incidents to or interests in such real property, lawfully subject to this chapter by the recordation of condominium instruments pursuant to the provisions of this chapter. See Virginia Code 55.1-1900
- Contract: A legal written agreement that becomes binding when signed.
- Declarant: means any person, or group of persons acting in concert, that (i) offers to dispose of its interest in a condominium unit not previously disposed of, including an institutional lender that may not have succeeded to or accepted any special declarant rights pursuant to § 55. See Virginia Code 55.1-1900
- Deed: The legal instrument used to transfer title in real property from one person to another.
- disposition: refers to any voluntary transfer of a legal or equitable interest in a condominium unit to a purchaser, but does not include the transfer or release of security for a debt. See Virginia Code 55.1-1900
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Nonbinding reservation agreement: means an agreement between the declarant and a prospective purchaser that is in no way binding on the prospective purchaser and that may be canceled without penalty at the sole discretion of the prospective purchaser. See Virginia Code 55.1-1900
- Person: means a natural person, corporation, partnership, association, trust, or other entity capable of holding title to real property, or any combination thereof. See Virginia Code 55.1-1900
- Purchaser: means any person, other than a declarant, that acquires by means of a voluntary transfer a legal or equitable interest in a condominium unit, other than (i) a leasehold interest, including renewal options, of less than 20 years or (ii) as security for a debt. See Virginia Code 55.1-1900
- real estate: includes lands, tenements and hereditaments, and all rights and appurtenances thereto and interests therein, other than a chattel interest. See Virginia Code 1-219
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- Unit: means a portion of the condominium designed and intended for individual ownership and use. See Virginia Code 55.1-1900
B. In lieu of escrowing deposits as provided in subsection A, the declarant of a condominium consisting of more than 50 units may:
1. Obtain and maintain a corporate surety bond issued by a surety authorized to do business in the Commonwealth, in the form and amount set forth below; or
2. Obtain and maintain an irrevocable letter of credit issued by a financial institution whose accounts are insured by the FDIC, in the form and amount set forth below.
The surety bond or letter of credit shall be maintained until (i) the granting of a deed to the unit, (ii) the purchaser’s default under a purchase contract for the unit entitling the declarant to retain the deposit, or (iii) the refund of the deposit to the purchaser, whichever occurs first.
C. The surety bond shall be payable to the Commonwealth for the use and benefit of every person protected under the provisions of this chapter. The declarant shall file the bond with the Common Interest Community Board. The surety bond may be either in the form of an individual bond for each deposit accepted by the declarant or, if the total amount of the deposits accepted by the declarant under this chapter exceeds $10,000, it may be in the form of a blanket bond. If the bond is a blanket bond, the amount shall be as follows. If the amount of such deposits is:
1. $75,000 or less, the blanket bond shall be $75,000;
2. More than $75,000 but less than $200,000, the blanket bond shall be $200,000;
3. $200,000 or more but less than $500,000, the blanket bond shall be $500,000;
4. $500,000 or more but less than $1 million, the blanket bond shall be $1 million; and
5. $1 million or more, the blanket bond shall be 100 percent of the amount of such deposits.
D. The letter of credit shall be payable to the Commonwealth for use and benefit of every person protected under this chapter. The declarant shall file the letter of credit with the Common Interest Community Board. The letter of credit may be either in the form of an individual letter of credit for each deposit accepted by the declarant or, if the total amount of the deposits accepted by the declarant under this chapter exceeds $10,000, it may be in the form of a blanket letter of credit. If the letter of credit is a blanket letter of credit, the amount shall be as follows. If the amount of such deposits is:
1. $75,000 or less, the blanket letter of credit shall be $75,000;
2. More than $75,000 but less than $200,000, the blanket letter of credit shall be $200,000;
3. $200,000 or more but less than $500,000, the blanket letter of credit shall be $500,000;
4. $500,000 or more but less than $1 million, the blanket letter of credit shall be $1 million; and
5. $1 million or more, the blanket letter of credit shall be 100 percent of the amount of such deposits.
For the purposes of determining the amount of any blanket letter of credit that a declarant maintains in any calendar year, the total amount of deposits considered held by the declarant shall be determined as of May 31 in each calendar year and the amount of the letter of credit shall be in accordance with the amount of deposits held as of May 31.
1974, c. 416, § 55-79.95; 1977, c. 91; 2007, c. 445; 2008, cc. 851, 871; 2019, c. 712.