Escrow of deposits.

(a) As used in this section, except as otherwise provided, the following terms shall have the following meanings:

(1) HARD COSTS. Any and all costs associated with the actual building and construction of the condominium project, including, but not limited to, site preparation, building materials, shell features, interior enclosures, fit-out costs, mechanical and electrical systems, and fixtures. The term hard costs does not include financing costs, compensation paid to architects, engineers, consultants, sales persons, or attorneys or for advertising or other marketing costs.

(2) QUALIFIED PURCHASER. a. An individual, a group of individuals, or an entity owned directly or indirectly solely by individuals where each individual shall have an income of more than two hundred thousand dollars ($200,000) for the calendar year immediately preceding the date of the purchaser's signing of the purchase contract, or a joint income with his or her spouse of three hundred thousand dollars ($300,000) for the calendar year immediately preceding the date of the purchaser's signing of the purchase contract, with a good faith reasonable expectation to maintain the same level of income for the current calendar year; b. an individual, a group of individuals, or an entity owned directly or indirectly solely by individuals where each individual shall have a net worth, either individually or jointly with his or her spouse, exceeding one million dollars ($1,000,000) on the date of the purchaser's signing of the purchase contract; or c. an individual, a group of individuals, or an entity owned directly or indirectly solely by individuals where each individual shall have an income for the calendar year immediately preceding the date of the purchaser's signing of the purchase contract of more than 30 percent of the condominium's purchase price, or a joint income with his or her spouse of more than 50 percent of the condominium's purchase price for such calendar year, with a good faith reasonable expectation to maintain the same level of income for the current calendar year. Any purchaser providing a written statement to declarant attesting that purchaser satisfies the qualifications of this subdivision shall be conclusively presumed to be a qualified purchaser within the meaning of this section and any such statement may be relied upon by declarant for purposes of this section.

(3) SUBSTANTIALLY COMPLETED. The issuance of a certificate of occupancy for the improvements, or the equivalent authorization issued by the governmental body having jurisdiction, and, in a jurisdiction where no certificate of occupancy or equivalent authorization is issued, shall mean substantial completion of construction of the improvements in accordance with the applicable plans and specifications.

(b) Except as provided in subsection (c), any deposit made in connection with the purchase or reservation of a unit from a person required to deliver an offering statement pursuant to Section 35-8A-402(c) shall be placed in escrow and held in this state by a licensed title insurance company, a licensed title agent, an attorney, a licensed real estate broker, or an institution whose accounts are insured by a governmental agency or instrumentality until: (1) delivered to the declarant at closing; (2) delivered to the declarant because of purchaser's default under a contract to purchase the unit; or (3) refunded to the purchaser. Declarant shall be permitted to accept a letter of credit in lieu of a portion or all of the deposit. Notwithstanding the foregoing, the escrow agent shall not be located outside of the state. Except as provided in subsection (c) and as otherwise provided herein, the funds representing the deposit shall be held in an interest bearing account and the interest shall belong to the party entitled to the principal deposit. Notwithstanding anything in this subsection to the contrary, funds deposited pursuant to a reservation agreement that provides the prospective purchaser is not bound to purchase a unit and that the prospective purchaser may choose to have the deposit returned to him or her, need not bear interest unless the reservation agreement specifically states that the deposit will bear interest.

(c) Notwithstanding subsection (b), provided that (1) the time period during which a purchaser may cancel an agreement to purchase a unit pursuant to Section 35-8A-408 has expired without the purchaser having properly and timely exercised the right to cancel and construction of the project in which the unit is located is not substantially completed; (2) the purchase contract between the declarant and the purchaser authorizes the declarant to withdraw deposited funds pursuant to this subsection; and (3) the declarant has acquired an interest in the land on which the condominium project will be built, the existence of a mortgage on the declarant's interest in the land shall not preclude the declarant's satisfaction of this condition, then the declarant shall be permitted to: a. withdraw deposited funds in excess of 10 percent of the purchase price from the escrow account for use in paying the hard costs incurred in the actual building and construction of the condominium project provided that at least 10 percent of the purchase price remains on deposit after any such withdrawals and provided that the purchaser whose funds are being withdrawn is a qualified purchaser; or b. after the declarant has caused a bond to be issued by a surety insurer licensed in this state in favor of a qualified purchaser for the full amount of the escrow deposit to be withdrawn, withdraw deposited funds from the escrow account up to the amount in the escrow account for use in paying the hard costs incurred in the actual building and construction of the condominium project.

(d) If declarant elects to post the bond pursuant to subsection (c)(3)b., the declarant may not withdraw more than the face amount of the bond, the bond shall name the purchaser as the beneficiary thereof and shall be payable to the purchaser if the purchaser obtains a final judgment against declarant requiring the declarant to return the deposit to the purchaser pursuant to the purchase contract, and the declarant may satisfy this bond requirement by causing one or more blanket bonds to be issued in favor of all purchasers whose deposited funds may be used pursuant to this subsection.

(e) In the event of a withdrawal pursuant to this subsection, the withdrawn funds need not bear interest and the declarant shall not owe the purchaser interest on any withdrawn funds if the purchase contract provides that interest on withdrawn funds will not accrue or be owed to the purchaser.

(f) A purchase contract that permits use of deposits in accordance with subsections (c)(3)a. and (c)(3)b. shall include the following legend conspicuously printed or stamped in boldfaced type on the first page of the contract and immediately above the place for the signature of the purchaser: DEPOSITS MAY BE USED BY DECLARANT FOR HARD COSTS INCURRED IN THE ACTUAL BUILDING AND CONSTRUCTION OF THE CONDOMINIUM PROJECT PURSUANT TO SECTION 35-8A-410, CODE OF ALABAMA 1975. Additionally, an offering statement given to a prospective purchaser whose deposit may be used as provided in this subsection shall contain the same legend, which may be contained within the body of the offering statement. The funds deposited into escrow pursuant to subsection (b) and subsection (c) may be held in one or more escrow accounts by the escrow agent. If only one escrow account is used, then the escrow agent must maintain separate accounting records for each purchaser and the amounts separately covered under subsections (b) and (c). For the purposes of subsection (c)(3)a., in determining whether more than 10 percent of the purchase price has been deposited, the face amount of any letter of credit accepted by declarant as part of the deposit shall be considered.

(g) Any escrow agent holding deposited funds pursuant to this section is protected from liability arising from disbursing funds pursuant to subsections (c) or (d), or both, if such disbursement is pursuant to a draw requested by the declarant and the declarant certifies in such writing to the escrow agent that the declarant is entitled to such disbursement pursuant to subsection (c) or, as the case may be, pursuant to subsection (d).

(Acts 1990, No. 90-551, p. 858, §4-110; Act 2005-300, 1st Sp. Sess., p. 570, §1; Act 2016-350, §1.)