TN HB0871

Deposits up to 10% of a condominium unit's purchase price must be held in escrow by a licensed title company, attorney, real estate broker, or bonded escrow company, with declarants permitted to access these funds for construction costs only if secured by a surety bond or irrevocable letter of credit

"Actual costs" for which escrow funds may be used include construction materials, labor, demolition, site clearing, permit fees, impact fees, utility reservation fees, and architectural/engineering/surveying fees directly related to the condominium project

Deposits exceeding 10% of the purchase price may be placed in a separate escrow account and used for actual construction costs if the purchase contract allows, but cannot be used for salaries, commissions, real estate licensee expenses, or advertising

Contracts permitting use of deposits for construction must include buyer-initialed disclosure language in bold or capital letters on the first page stating deposits may be used for construction purposes

Third-party lenders have no liability for deposit use or return unless they take ownership of the project through foreclosure, and only then for deposits not already disbursed; effective July 1, 2025 for contracts entered into or amended on or after that date