On May 12, 2021, Governor Inslee signed SB 5024, removing the requirement to place all earnest money received for a common interest community property (condos, subdivisions, etc.) in an escrow account. Now, developers can simply secure a bond, instead – and use the earnest money for construction costs.
Since July 2018, developers of residential subdivisions and condominiums have been required to place earnest money from buyers into an escrow account. The money was refundable and could not be used to build the property; it had to remain in the account until closing.
Beginning July 25, 2021, developers may agree with buyers that earnest money – in an amount up to 5% of the purchase price – MAY be used for construction cost if the developer obtains a surety bond to protect the buyer’s interests, instead. The developer may get an individual bond for each deposit or may have a blanket bond, protecting all the earnest money deposits the developer receives.
Developers – contact HLG to revise your purchase and sale agreements and public offering statements to benefit from this escrow relief change in the law.