                                 CODE OF VIRGINIA

ESCROW OF DEPOSITS; USE OF CORPORATE SURETY BOND OR IRREVOCABLE LETTER OF CREDIT
(§ 55.1-2220)

A. Any deposit made in connection with the purchase or reservation of a product
shall be held in escrow. All deposits shall be held in escrow until (i)
delivered to the developer upon expiration of the purchaser&#8217;s cancellation
period provided the purchaser&#8217;s right of cancellation has not been
exercised, (ii) delivered to the developer because of the purchaser&#8217;s
default under a contract to purchase a time-share, or (iii) refunded to the
purchaser. Such funds shall be deposited in a separate account designated for
this purpose that is federally insured and located in the Commonwealth; except
where such deposits are being held by a real estate broker or attorney licensed
under the laws of the Commonwealth, such funds may be placed in that
broker&#8217;s or attorney&#8217;s regular escrow account and need not be placed
in a separate designated account. Such escrow funds shall not be subject to
attachment by the creditors of either the purchaser or the developer.

B. In lieu of escrowing deposits as provided in subsection A, the developer of a
time-share project consisting of more than 25 units may:

   1. Obtain and maintain a corporate surety bond issued by a surety authorized
   to do business in the Commonwealth, in the form and amount set forth in
   subsection C; or

   2. Obtain and maintain an irrevocable letter of credit issued by a financial
   institution whose accounts are insured by the FDIC, in the form and amount set
   forth in subsection D.
   				The surety bond or letter of credit shall be maintained until (i) the
   expiration of the purchaser&#8217;s cancellation period, (ii) the
   purchaser&#8217;s default under a purchase contract for the time-share estate
   entitling the developer to retain the deposit, or (iii) the refund of the
   deposit to the time-share purchaser, whichever occurs first.

C. The surety bond shall be payable to the Commonwealth for the use and benefit
of every person protected under the provisions of this chapter. The developer
shall file the bond with the Board. The surety bond may be either in the form of
an individual bond for each deposit accepted by the developer or, if the total
amount of the deposits accepted by the developer under this chapter exceeds
$10,000, it may be in the form of a blanket bond. If the bond is a blanket bond,
the amount shall be as follows. If the amount of such deposits is:

   1. More than $10,000 but not more than $75,000, the blanket bond shall be
   $75,000;

   2. More than $75,000 but less than $200,000, the blanket bond shall be
   $200,000;

   3. $200,000 or more but less than $500,000, the blanket bond shall be
   $500,000;

   4. $500,000 or more but less than $1 million, the blanket bond shall be $1
   million; and

   5. $1 million or more, the blanket bond shall be 100 percent of the amount of
   such deposits.

D. The letter of credit shall be payable to the Commonwealth for the use and
benefit of every person protected under this chapter. The developer shall file
the letter of credit with the Board. The letter of credit may be either in the
form of an individual letter of credit for each deposit accepted by the
developer or, if the total amount of the deposits accepted by the developer
under this chapter exceeds $10,000, it may be in the form of a blanket letter of
credit. If the letter of credit is a blanket letter of credit, the amount shall
be as follows. If the amount of such deposits is:

   1. More than $10,000 but not more than $75,000, the blanket letter of credit
   shall be $75,000;

   2. More than $75,000 but less than $200,000, the blanket letter of credit
   shall be $200,000;

   3. $200,000 or more but less than $500,000, the blanket letter of credit shall
   be $500,000;

   4. $500,000 or more but less than $1 million, the blanket letter of credit
   shall be $1 million; and

   5. $1 million or more, the blanket letter of credit shall be 100 percent of
   the amount of such deposits.
   				For the purposes of determining the amount of any blanket letter of credit
   that a developer maintains in any calendar year, the total amount of deposits
   considered held by the developer shall be determined as of May 31 in each
   calendar year and the amount of the letter of credit shall be in accordance
   with the amount of deposits held as of May 31.

E. The developer shall disclose in the contract or in the public offering that
the deposit may not be held in escrow or protected by a surety bond or letter of
credit after expiration of the cancellation period and that such deposit is not
protected as an escrow after expiration of the cancellation period. This
disclosure shall include a statement of whether or not the developer reserves
the option to sell or assign any promissory note given by a purchaser to another
entity, whether or not such entity is affiliated with the developer. Both
disclosures shall appear in boldface type of a minimum size of 10 points.

HISTORY: 1981, c. 462, § 55-375; 1984, c. 429; 1985, c. 517; 1994, c. 580;
1998, c. 460; 2006, c. 653; 2008, cc. 851, 871; 2018, cc. 33, 133; 2019, c. 712.