2023 Louisiana Laws › Revised Statutes › Title 9 - Civil Code-Ancillaries › §9:1131.16.1. Escrow of payments; escrow accounts; nondisturbance agreements; interests, liens, and encumbrances; alternative assurances

RS 9:1131.16.1 - Escrow of payments; escrow accounts; nondisturbance agreements; interests, liens, and encumbrances; alternative assurances
A. Prior to the filing of the public offering statement with the Louisiana Real Estate Commission, the developer shall establish an independent escrow account with an escrow agent for the purpose of protecting the payments of purchasers. No developer or seller nor any officer, director, affiliate, subsidiary, or employee thereof may serve the escrow agent in any of the above capacities. An escrow agent shall maintain the accounts prescribed in this Section in such a manner as to be under the direct supervision and control of the escrow agent. A fiduciary relationship shall exist between the escrow agent and the purchaser. The escrow agent shall retain all affidavits received pursuant to this Section for a period of five years. Should the escrow agent receive conflicting demands for the escrowed funds or property, the escrow agent shall immediately, with the consent of all parties, either submit the matter to arbitration or seek an adjudication of the matter from a court of competent jurisdiction.
B. One hundred percent of all funds or other property constituting the purchase payment which is received from or on behalf of purchasers of timeshare interests prior to the occurrence of events required herein shall be deposited pursuant to an escrow agreement approved by the Louisiana Real Estate Commission. The deposit of such funds shall be evidenced by an executed escrow agreement between the escrow agent and the developer, the provisions of which shall include the following:
(1) Funds may be disbursed to the developer by the escrow agent from the escrow account only after expiration of the purchaser's rescission period and in accordance with the purchase contract, subject to Subsection C of this Section.
(2) If a purchaser properly cancels the purchase contract pursuant to its terms, the funds shall be paid to the purchaser or paid to the developer if the purchaser's funds have been previously refunded by the developer.
C. If a developer contracts to sell a timeshare interest and the construction of any property in which the timeshare interest is located has not been completed, the developer, upon expiration of the rescission period, shall continue to maintain in an escrow account all funds received by or on behalf of the developer from the purchaser under a purchase contract. Funds shall be released from escrow as follows:
(1) If a purchaser properly cancels the purchase contract pursuant to its terms, the funds shall be paid to the purchaser or paid to the developer if the purchaser's funds have been previously refunded by the developer.
(2) If a purchaser defaults in the performance of the purchaser's obligations under the purchase contract, the funds shall be paid to the developer.
(3) If the developer defaults in the performance of the developer's obligations under the purchase contract, the funds shall be paid to the purchaser.
(4) If the funds of a purchaser have not been previously disbursed in accordance with the provisions of this Subsection and if no claim of cancellation or default has been received, the funds may be disbursed to the developer by the escrow agent upon the issuance of acceptable evidence of completion of construction as provided herein.
D. In lieu of the provisions of Subsections B and C of this Section, the Louisiana Real Estate Commission may accept from the developer a surety bond, irrevocable letter of credit, or other financial assurance acceptable to the Louisiana Real Estate Commission including, without limitation, any financial assurance posted in another state or jurisdiction, or as provided by rule. Any acceptable financial assurance must be the lesser of an amount equal to or in excess of the funds which would otherwise be placed in escrow, or in an amount equal to the cost to complete the incomplete property in which the timeshare interest is located.
E. The developer shall provide escrow account information to the Louisiana Real Estate Commission and shall execute in writing an authorization consenting to an audit or examination of the account by the Louisiana Real Estate Commission on forms provided by the Louisiana Real Estate Commission. The developer shall make available documents related to the escrow account or escrow obligation to the Louisiana Real Estate Commission upon the Louisiana Real Estate Commission's request. The developer shall maintain any disputed funds in the escrow account until either of the following occurs:
(1) The developer receives written direction agreed to by signature of all parties.
(2) The funds are deposited with a court of competent jurisdiction in which a civil action regarding the funds has been filed.
F. As used in this Section, independent escrow agent means a financial institution whose accounts are insured by a governmental agency or instrumentality, an attorney, or a licensed title insurance company, in which:
(1) The escrow agent is not a relative or an employee of the developer or managing entity or of any officer, director, affiliate, or subsidiary of the developer or managing entity.
(2) There is no financial relationship, other than the payment of fiduciary fees or as otherwise provided in this Section, between the escrow agent and the developer or managing entity or any officer, director, affiliate, or subsidiary of the developer or managing entity.
(3) Compensation paid by the developer to the escrow agent for services rendered is not paid from funds in the escrow account.
G. For purposes of Subsection F of this Section, an independent escrow agent may not be disqualified to serve as escrow agent solely because of any of the following:
(1) The escrow agent provides the developer or managing entity with routine banking services that do not include construction or receivables financing or any other lending activities.
(2) A nonemployee, attorney-client relationship exists between the developer or managing entity and the escrow agent.
(3) The escrow agent performs closings for the developer or issues owner's or lender's title insurance commitments or policies in connection with such closings.
H. If the developer has previously provided a certified copy of any document required by this Section, the developer may, for all subsequent disbursements, substitute a true and correct copy of the certified copy, provided no changes to the document have been made or are required to be made.
I. In lieu of any escrow provisions required by this Section, the director of the Louisiana Real Estate Commission shall have the discretion to permit deposit of funds or other property in an escrow account as required by the jurisdiction in which the sale took place.
J. In lieu of any escrows required by this Section, the director of the Louisiana Real Estate Commission shall have the discretion to accept other assurances, including but not limited to a surety bond issued by a company authorized and licensed to do business in this state as surety or an irrevocable letter of credit in an amount equal to the escrow requirements of this Section.
K. An escrow agent holding funds escrowed pursuant to this Section may invest such escrowed funds in securities of the United States government, or any agency thereof, or in savings or time deposits in institutions insured by an agency of the United States government. Interest generated by any such investments shall be paid to the party to whom the escrowed funds or property are paid unless otherwise specified by contract.
L. Each escrow agent shall maintain separate books and records for each timeshare plan and shall maintain such books and records in accordance with good accounting practices.
M. Developers, sellers, escrow agents, and their employees and agents have a fiduciary duty to purchasers with respect to funds required to be escrowed under this Section. Any developer, seller, escrow agent, or any employee or agent of a developer, seller, or escrow agent who intentionally fails to comply with the requirements of this Section concerning the establishment of an escrow account, deposits of funds, and property into escrow, or withdrawal therefrom, shall be fined not more than three thousand dollars or shall be imprisoned, with or without hard labor, for not more than ten years, or both. The failure to establish an escrow account or to place funds therein as required in this Section is prima facie evidence of an intentional and purposeful violation of this Section.
N. Excluding any encumbrance placed against the purchaser's timeshare interest securing the purchaser's financing for such purchase, the developer shall not be entitled to the release of any funds escrowed under this Section or release of bond or other acceptable financial assurance with respect to each timeshare interest and any other property or rights to property appurtenant to such timeshare interest, including any amenities represented to the purchaser as being part of the timeshare plan until the developer has provided satisfactory evidence to the Louisiana Real Estate Commission of one of the following:
(1) The timeshare interest together with any other property or rights to property appurtenant to such timeshare interest, including any amenities represented to the purchaser as being part of the timeshare plan, are free and clear of any of the claims of the developer, any owner of immovable property, a mortgagee, judgment creditor, other lienholder, or any other person having an interest in or lien or monetary encumbrance against such timeshare interest or appurtenant property or property rights.
(2) The developer, any owner of immovable property, a mortgagee, judgment creditor, other lienholder, or any other person having an interest in or lien or monetary encumbrance against such timeshare interest or appurtenant property or property rights, including any amenities represented to the purchaser as being part of the timeshare plan, has recorded a subordination and notice to creditors document and recorded it among the appropriate public records in the jurisdiction in which the timeshare interest is located. The subordination document shall expressly and effectively provide that the interest holder's right, lien, or encumbrance shall not adversely affect, and shall be subordinate to, the rights of the owners of the timeshare interests in the timeshare plan regardless of the date of purchase, from and after the effective date of such subordination document.
(3) The developer, any owner of immovable property, a mortgagee, judgment creditor, other lienholder, or any other person having an interest in or lien or monetary encumbrance against such timeshare interest or appurtenant property or property rights, including any amenities represented to the purchaser as being part of the timeshare plan, has transferred the subject accommodations or amenities or all use rights therein to a nonprofit organization or owners' association to be held for the use and benefit of the owners of the timeshare plan. The nonprofit organization or owners' association shall act as a fiduciary to the purchasers, provided that the developer has transferred control of such entity to the owners or does not exercise its voting rights in such entity with respect to the subject accommodations or amenities. Prior to such transfer, any lien or other encumbrance against such accommodation or facility shall be made subject to a subordination and notice to creditors instrument pursuant to Paragraph (2) of this Subsection.
Acts 2003, No. 978, §1.