Developer Subdivision Reservation Deposits

Before transferring or negotiating to transfer any subdivision or part of a subdivision, a developer is required to apply for registration with the real estate commission (commission). Current law requires that, with permission from the commission, any reservation fees that a developer receives from prospective purchasers while the developer's registration application is pending must be held in trust by a third party and be fully refundable.

If the subdivision is a time share estate, the act requires that, after the commission has approved a developer's registration application, any earnest money received by the developer from a prospective purchaser must be held in trust by an independent third party. The act creates an exception to this requirement for earnest money deposits received from an accredited investor. A developer may use funds from an accredited investor's deposit for development purposes only if the purchase contract or other written disclosure clearly sets forth:

• To whom the funds will be delivered;
• When the delivery will occur;
• How the funds will be used; and
• Any restrictions on the use of the funds.

APPROVED by Governor May 28, 2024

EFFECTIVE August 7, 2024
(Note: This summary applies to this bill as enacted.)