Shown verbatim: the complete text as captured from the official PDF posted by the Tennessee General Assembly, fetched 2026-09-25. Page and line markers are part of the official record; nothing is edited or removed. This is the chaptered version. The official bill page.
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State ef J e,uzessee
PUBLIC CHAPTER NO. 180
SENATE BILL NO. 1079
By Johnson
Substituted for: House Bill No. 871
By Rudder, Lamberth
AN ACT to amend Tennessee Code Annotated, Title 66, relative to the use of escrow funds for
condominium projects.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 66-27-506, is amended by deleting the
section and substituting:
(a) As used in this section, "actual costs" includes expenditures for construction
materials and labor, including demolition and site clearing costs, permit fees, impact fees, utility
reservation fees, and architectural, engineering, and surveying fees that directly relate to the
construction and development of the condominium project or any easements and rights
appurtenant thereto.
(b)(1)
(A) For a deposit that is made in connection with the purchase of a unit
from a declarant, the amount of such deposit up to the first ten percent (10%)
of the purchase price must be placed in escrow and held in this state in an
account designated solely for such purpose by a licensed title insurance
company or agent of the licensed title insurance company, an attorney, a
licensed real estate broker, or an independent bonded escrow company, and
must be deposited in an institution whose accounts are insured by a
governmental agency or instrumentality, or any other lawful escrow or trust
account. The declarant may access the funds any time prior to commencement
of construction until completion of construction for payment of actual costs in
the construction and development of the condominium only if:
(i) A surety bond is issued by a licensed surety company in an
amount equivalent to the deposit being requested, ensuring repayment
to the buyer if the declarant fails to deliver the unit in a timely manner in
accordance with the purchase contract; or
(ii) An irrevocable letter of credit or other equivalent financial
guarantee is provided, payable to the buyer, for the full amount of the
deposit held in escrow, if the declarant fails to deliver the unit timely in
accordance with the purchase contract.
(8) The funds must .remain in escrow or the surety bond or irrevocable
letter of credit, if applicable, must remain in effect until the funds are:
(i) Delivered to the declarant at closing;
(ii) Delivered to the declarant because of purchaser's default
under a contract to purchase the unit;
(iii) Refunded to the purchaser;
(iv) lnterpleaded into a court of appropriate jurisdiction; or
SB 1079
(v) Disbursed pursuant to a final order of a court of appropriate
jurisdiction.
(2) The amount of the deposit in excess of ten percent (10%) of the purchase
price, to the extent received after commencement of construction but prior to the
completion of construction by the declarant, may be placed in a separate escrow
account and used for the actual costs incurred by the declarant in the construction
and development of the condominium property in which the unit to be sold is located,
if the purchase or reservation contract allows for the use of the deposit in such
manner; provided, that the funds shall not be used for salaries, commissions,
expenses of real estate licensees, or advertising purposes.
(3) A contract that permits the use of the deposit for the purposes described in
subdivision (b)(1) or (2) must be initialed by the buyer and include the following
language in boldfaced type or capital letters no smaller than the largest type on the
first page of the contract:
DEPOSITS MADE TO THE DECLARANT UNDER THIS AGREEMENT MAY
BE USED FOR CONSTRUCTION PURPOSES BY THE DECLARANT IN
ACCORDANCE WITH TENNESSEE CODE ANNOTATED, SECTION 66-27-
506.
(c) A third-party lender has no liability with respect to the use or return of deposits
described in subsection (b) or determining whether an appropriate form of security was
obtained for the use of the deposited funds unless the third-party lender takes ownership or
control of the condominium project through foreclosure or other remedy, and only then to the
extent of any deposits not already disbursed and expended.
SECTION 2. This act takes effect July 1, 2025, the public welfare requiring it, and applies to
contracts or agreements entered into or amended on or after that date.
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SENATE BILL NO. 1079
PASSED: March 28, 2025
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RANDY I.._... ___ .
SPEAKER OF THE SENATE
CAMERO'N SEXTON, SPEAKER
HOUSE OF REPRESENTATIVES
11tt. Apa APPROVED this I 2025
day of
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- -BILL LEE, GOVERNOREvery fact on this page links to its source, starting with the official bill record.