CLTA Opposes Legislation to Allow Disbursement of Escrow Deposits for Construction Costs

Assembly Bill 1406 (Ward) would authorize a purchaser’s deposit that is held in escrow pursuant to a binding sales contract for a lot or parcel within a subdivision that is not yet constructed or developed to be disbursed before closing to pay for project expenses.

​The CLTA is opposed to the legislation because of its potential negative consumer impact and resulting lawsuits that could tie-up housing development.

The bill would impose a number of conditions for disbursement of purchasers’ deposits, including that the developer has submitted to the Department of Real Estate a project budget showing all costs required to be paid to complete the project. The bill would permit the disbursement of a purchaser’s deposit before closing to pay any cost set forth in the project budget. A specified notice would also be required to be prominently displayed in the developer’s public report for the project if a purchaser’s deposit is to be disbursed before closing.