Senate adopts amendment to H666 allowing condo deposit use with surety bond and orders third reading

The Senate on a voice vote adopted a committee amendment to H666 and ordered the bill for third reading. The bill, as reported by the senator from Washington, would allow deposit funds paid to reserve units in condominium or common-interest developments to be used for construction costs if the purchase agreement so permits and the developer obtains and maintains a surety bond to protect purchasers’ deposits.

Senator from Washington said the change ‘‘allows another tool for contractors to help offset their construction costs, and it would protect the person that is putting the deposit on the unit to know that if something goes wrong, their deposit is insured.’’ The amendment requires the declarant to provide purchasers a copy of the surety bond and to ensure purchasers’ names are listed on the bond, rather than merely disclosing the issuer’s identity.

Under current law, the senator explained, deposit funds must be held in escrow until closing or returned if a sale does not proceed; H666 would permit an alternative where funds can be used earlier in the project if the buyer agrees and a bond is in place. The sponsor said standard surety products would make purchasers whole if the developer fails to meet obligations.

The senator reported the committee vote in favor (reported in the transcript as '500') and noted testimony from Department of Insurance regulators and industry stakeholders including Mary Block, John Gray, Stephanie Jerome, Molly Mehar, Michael Ramsey, Michael Snead and Peter Tucker. The amendment was adopted by voice vote and the Senate ordered the bill read a third time.

Next steps: H666 will return for third reading with the committee amendment in place.