Virginia Code 55.1-2303: Blanket encumbrances
A. It is unlawful for any developer or agent to sell or lease a lot in a subdivision that is subject to a blanket encumbrance unless the blanket encumbrance or effective supplemental agreement contains a release provision permitting legal title to individual lots or other interest contracted for to be obtained free and clear of the blanket encumbrance. Nothing in this section shall be construed to limit either the conditions upon which such release may be premise or the modification or amendment of such release provision as to (i) any purchaser other than a purchaser under an installment sales contract or (ii) any purchaser under an installment sales contract that is executed subsequent to the recordation of the amendment or modification.
Terms Used In Virginia Code 55.1-2303
- Agent: means any person who represents or acts for or on behalf of a developer in the disposition of any lot in a subdivision, but does not include an attorney whose representation of another person consists solely of rendering legal services. See Virginia Code 55.1-2300
- Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
- Blanket encumbrance: means a trust, deed, mortgage, judgment, or any other lien or encumbrance, securing or evidencing the payment of money and affecting the land comprising the subdivision to be offered and sold or leased or affecting more than 10 lots or parcels of such lands, or an agreement affecting more than 10 lots or parcels of such lands by which the developer holds such subdivision under option, contract, sale, or trust agreement. See Virginia Code 55.1-2300
- Contract: A legal written agreement that becomes binding when signed.
- Developer: means any person who offers, directly or indirectly, for disposition, any lot in a subdivision, but does not include a trustee under a deed of trust securing an indebtedness or other obligation who sells lots within such subdivision under foreclosure proceedings, provided that the purpose in so doing is not to evade the provisions of this chapter. See Virginia Code 55.1-2300
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Lien: A claim against real or personal property in satisfaction of a debt.
- Lot: means any unit, parcel, division, piece of land, or interest in land except utility easements if such interest carries with it the exclusive right to use a specific portion of property. See Virginia Code 55.1-2300
- Purchaser: means a person who acquires or attempts to acquire any lot in a subdivision. See Virginia Code 55.1-2300
- Subdivision: means :
1. See Virginia Code 55.1-2300
- Trust account: A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies. Source: OCC
B. Unless blanket encumbrance release provisions provide that the lien of the blanket encumbrance is subordinate to the rights of persons purchasing from the developer or agent and that those purchasers have the unconditional right to obtain legal title or other interest contracted for free and clear of the blanket encumbrance upon compliance with the terms and conditions of the purchase or lease, it is unlawful for a developer or agent to sell or lease lots except in compliance with one of the following conditions:
1. Any earnest money deposit or advance or other payment made by the purchaser on account of the purchase of a lot is placed in an escrow account that is a trust account maintained in a federally insured depository located in the Commonwealth and that fully protects the interest of the purchaser until:
a. Fee title or other interest contracted for is conveyed to the purchaser free and clear of the blanket encumbrance;
b. Either the developer or purchaser defaults under the contract and a final determination as to the disbursal of sums paid is made by a court of competent jurisdiction; or
c. The developer voluntarily orders the return of the money to the purchaser; or
2. Title to the subdivision is held in trust under a trust agreement until a proper release is obtained and legal title or other interest contracted for is conveyed to the purchaser.
1978, c. 510, § 55-342; 1980, c. 546; 1996, c. 372; 2019, c. 712.