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Builders, AG differ over escrow rule for buyer-paid upgrades as committee hears bill to clarify deposits
Summary
Senate Bill 26 would clarify that buyer‑paid, item‑specific upgrade funds can be paid to builders and used in construction without being treated as escrow deposits in certain registrations; builders say the change addresses cash‑flow and availability problems caused by a recent AG interpretation.
Senator Howard Pearl (District 17) presented Senate Bill 26 to clarify when funds paid by buyers for upgrades or personalized items in new home construction must be held in escrow. The bill would allow funds dedicated to upgrades — for example, a buyer’s paid premium tile or custom fixtures — to be paid directly to a builder for use in the construction process instead of being treated as escrow deposits in subdivisions or condominium registrations above statutory unit thresholds.
Senator Pearl described a recent change in the Attorney General’s office interpretation that treats upgrade payments as deposits that must be held in escrow in subdivisions of 15 or more single‑family homes or condominiums of 10 or more units. He said builders now face three problems when upgrade funds are treated as escrow: builders must (1) absorb prepayment costs if buyers…
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