                                 CODE OF VIRGINIA

PROTECTION OF ESCROW FUNDS, ETC., HELD BY A REAL ESTATE BROKER IN THE EVENT OF
FORECLOSURE OF REAL PROPERTY; REQUIRED DEPOSITS (§ 54.1-2108.1)

A. Notwithstanding any other provision of law:

   1. If a licensed real estate broker or an agent of such licensee is holding
   escrow funds for the owner of real property and such property is foreclosed
   upon, the licensee or agent shall have the right to file an interpleader
   action pursuant to &#xA7; 16.1-77.

   2. If a single-family residential dwelling unit is foreclosed upon, and at the
   date of the foreclosure sale there is a real estate purchase contract to buy
   such property and such contract provides that the earnest money deposit held
   in escrow by a licensee shall be paid to a party to the contract in the event
   of a termination of the real estate purchase contract, the foreclosure shall
   be deemed a termination of the real estate purchase contract and the licensee
   or an agent of the licensee may, absent any default on the part of the
   purchaser, disburse the earnest money deposit to the purchaser pursuant to
   such provisions of the real estate purchase contract without further consent
   from, or notice to, the parties.

   3. If a single-family residential dwelling unit is foreclosed upon and there
   is a tenant in the dwelling unit on the date of the foreclosure sale and the
   landlord is holding a security deposit of the tenant, the landlord shall
   handle the security deposit in accordance with applicable law, which requires
   the holder of the landlord&#8217;s interest in the dwelling unit at the time
   of termination of tenancy to return any security deposit and any accrued
   interest that is duly owed to the tenant, whether or not such security deposit
   is transferred with the landlord&#8217;s interest by law or equity, and
   regardless of any contractual agreements between the original landlord and his
   successors in interest. Nothing herein shall be construed to prevent the
   landlord from making lawful deductions from the security deposit in accordance
   with applicable law.

   4. If a single-family residential dwelling unit is foreclosed upon pursuant to
   &#xA7; 55.1-1237 and there is a tenant in such dwelling unit on the date of
   the foreclosure sale, the successor in interest who acquires the dwelling unit
   at the foreclosure sale shall assume such interest subject to the following:
   				a. If the successor in interest acquires the dwelling unit for the purpose
   of occupying such unit as his primary residence, the successor in interest
   shall provide written notice to the tenant, in accordance with the provisions
   of &#xA7; 55.1-1202, notifying the tenant that the rental agreement is
   terminated and that the tenant must vacate the dwelling unit on a date not
   less than 90 days after the date of such written notice.
   				b. If the successor in interest acquires the dwelling unit for any other
   purpose, the successor in interest shall acquire the dwelling unit subject to
   the rental agreement and the tenant shall be permitted to occupy the dwelling
   unit for the remaining term of the lease, provided, however, that the
   successor in interest may terminate the rental agreement pursuant to &#xA7;
   55.1-1245 or the terms of the rental agreement. The successor in interest
   shall provide written notice of such termination to the tenant in accordance
   with the provisions of &#xA7; 55.1-1202.
   				If rent is paid to a real estate licensee acting on behalf of the landlord
   as a managing agent, such property management agreement having been entered
   into prior to and in effect at the time of the foreclosure sale, the managing
   agent may collect the rent and shall place it into an escrow account by the
   end of the fifth business banking day following receipt.

   5. If a single-family residential dwelling unit is foreclosed upon, and at the
   date of the foreclosure sale there is a written property management agreement
   between a landlord and a real estate licensee licensed pursuant to the
   provisions of &#xA7; 54.1-2106.1, the foreclosure shall convert the property
   management agreement into a month-to-month agreement between the successor
   landlord and the real estate licensee acting as a managing agent, except in
   the event that the terms of the original property management agreement between
   the landlord and the real estate licensee acting as a managing agent require
   an earlier termination date. Unless altered by the parties, the terms of the
   original property management agreement that existed between the landlord and
   the real estate licensee acting as a managing agent shall govern the agreement
   between the successor landlord and the real estate licensee acting as a
   managing agent. The property management agreement may be terminated by either
   party upon provision of written notice to the other party at least 30 days
   prior to the intended termination date. Any funds received or held by the real
   estate licensee acting as a managing agent shall be disbursed only in
   accordance with the terms of the property management agreement or as otherwise
   provided by law.

B. Notwithstanding any other provision of law:

   1. Any rent paid to a real estate licensee acting on behalf of a landlord
   client in connection with the lease shall be placed in an escrow account by
   the end of the fifth business banking day following receipt, regardless of
   when received, unless otherwise agreed to in writing by the principals to a
   lease transaction.

   2. Any security deposits paid to a real estate licensee acting on behalf of a
   landlord client in connection with the lease shall be placed in an escrow
   account by the end of the fifth business banking day following receipt, unless
   otherwise agreed to in writing by the principals to a lease transaction.

   3. Any application deposit as defined by &#xA7; 55.1-1200 paid by a
   prospective tenant for the purpose of being considered as a tenant for a
   dwelling unit to a real estate licensee acting on behalf of a landlord client
   shall be placed in escrow by the end of the fifth business banking day
   following approval of the rental application by the landlord, unless otherwise
   agreed to in writing by the principals to a lease transaction.

   4. Such funds shall remain in an escrow account until disbursed in accordance
   with the terms of the lease, the property management agreement, or the
   applicable statutory provisions, as applicable.

   5. Except in the event of foreclosure, if a real estate licensee acting on
   behalf of a landlord client as a managing agent elects to terminate the
   property management agreement, the licensee may transfer any funds held in
   escrow by the licensee on behalf of the landlord client to the landlord client
   without his consent, provided that the real estate licensee provides written
   notice to each tenant that the funds have been so transferred. In the event of
   foreclosure, a real estate licensee shall not transfer any funds to a landlord
   client whose property has been foreclosed upon.

   6. A real estate licensee acting on behalf of a landlord client as a managing
   agent who complies with the provisions of this section shall have immunity
   from any liability for such compliance, in the absence of gross negligence or
   intentional misconduct.

HISTORY: 2010, c. 181; 2013, c. 489; 2017, cc. 67, 394; 2020, c. 1014; 2021, Sp.
Sess. I, c. 426.