SB 444 - Under this act, in all written contracts made between a building contractor or a developer and a prospective buyer of a residential home, the building contractor or developer shall notify the buyer that:
(1) Twenty percent of the purchase price shall be deposited in an escrow account with a title agency or title insurance company authorized to insure real property within this state;
(2) The building contractor or developer will maintain a corporate surety bond in an amount equal to 20% of the purchase price of the residential home; or
(3) The building contractor or developer will provide an affidavit stating that all subcontractors, laborers or materialmen have been paid in full.
The title agency or title insurance company shall serve as the escrow agent and shall act in a fiduciary capacity with respect to such account. All interest earned on the deposited funds shall be credited to the escrow account. Funds deposited in the escrow account shall be held to satisfy valid mechanics' liens filed by contractors, subcontractors, or other materialmen who have provided materials or labor with respect to the residential home. Prior to or upon the final settlement or closing on the residential home, the building contractor or developer shall set aside twenty percent of the purchase price in the escrow account.
The monies shall be held in escrow no longer than six months following the final closing or settlement date on the residential home and shall be released to the building contractor or developer upon such date unless the title agency receives notice that a mechanic's lien has been filed. If any mechanics' liens have been filed, the monies shall be held in escrow until the parties' rights to the escrowed funds have been determined by a court of competent jurisdiction or by agreement between the principal contractor and the subcontractor, materialman, or other person who filed the claim.
Any building contractor or developer who willfully fails to comply with the provisions of this section concerning the establishment of an escrow account and the deposit of funds into escrow shall be guilty of a Class A misdemeanor. The failure to place funds in an escrow account within five business days of the closing date shall be prima facie evidence of a violation of this act.
In lieu of establishing an escrow account, the building contractor or developer may obtain and maintain a corporate surety bond, letter of credit, or other acceptable financial instrument in amount equal to 20% of the purchase price. The building contractor may also escape establishing an escrow account by providing the buyer an affidavit stating that the building contractor has paid each of the building contractor’s subcontractors, laborers or materialmen in full for all labor and materials provided. A building contractor who intentionally, knowingly, or recklessly makes a false or misleading statement in the affidavit shall be guilty of a Class D felony.