Relating to the withdrawal of certain deposits placed in escrow in connection with the purchase or reservation of a condominium unit.

89(R) HB 4876 - House Committee Report version - Bill Text

89R26657 JBD-D

By: Lambert

H.B. No. 4876

Substitute the following for H.B. No. 4876:

By: Button

C.S.H.B. No. 4876

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
for
[
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
because of the declarant's default under

a contract to purchase the unit
. 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 or reservation agreement to purchase a

unit provides, in bold or underlined type, that the deposit made for

the purchase or reservation of the unit may be used for actual

development and construction costs and the declarant obtains and

maintains a surety bond or insurance as described by Subsection

(d), the declarant may withdraw escrow funds when development or

construction of improvements to the condominium project begins.

The funds may be used only for actual development and construction

costs of the project in which the unit is located.

For the purposes

of this subsection, actual development and construction costs:

(1)

include expenditures for demolition, site

clearing, permit fees, impact fees, and utility reservation fees,

as well as architectural, consultant, engineering, and surveying

fees that directly relate to construction and development of the

condominium project or the easements and rights appurtenant to the

project; and

(2) do not include expenditures for:

(A)

salaries, commissions, or expenses of

salespersons;

(B)

advertising, marketing, or promotional

purposes; or

(C)

loan fees, principal and interest on loans,

attorney fees, accounting fees, or insurance costs.

(c)

The deposits made for the purchase or reservation of the

unit and used for actual development and construction costs shall

be, as applicable:

(1)

applied as a credit against the purchase price of

the unit at closing;

(2)

delivered to the declarant because of the

purchaser's default under the contract to purchase the unit; or

(3)

refunded to the purchaser because of the

declarant's default under the contract to purchase the unit.

(d)

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.

(e)

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.