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Applying Condominium Unit Escrow Deposits Towards Construction Costs: Proceed with Caution

While residential condominium development still has not reached its pre-Great Recession levels, it is growing (albeit slowly). This type of project presents an interesting source of capital for developers in the form of earnest money deposits by condominium unit purchasers while the condominium project is under construction (“Deposits”). To decrease their cost of capital and to help fill their capital stack, a developer may consider applying Deposits toward the cost of construction prior to the closing of the sale of the applicable condominium units. That developer would also likely expect that those applied Deposits will count towards the developer’s equity for purposes of obtaining a construction loan. Developers and their construction lenders considering this application of Deposits should proceed with caution because it might be against the law, irrespective of what the underlying purchase and sale agreement says. It could result in a purchaser’s right to cancel the purchase contract and developer liability for damages and attorney’s fees, and possibly even punitive damages.
Rocky Mountain Real Estate Blog

The latest real estate and land use news and updates.

Colorado Springs: A Millennial Haven?

It is no surprise that Colorado is ranked as the third most popular state for relocating millennials.  However, where in the state these 23-38 year olds are choosing to live just might be.  While Denver may seem to be a logical choice for inbound millennials, as has been the case in the recent years, millennials... Continue Reading...

Rocky Mountain Sign Law Blog

Regulatory, best practices, and other First Amendment news.

Federal Court Denies Challenge to Oakland, California’s “1% for Art” Program

In August, the Ninth Circuit Court of Appeals affirmed a district court’s rejection of claims by the Building Industry Association of the Bay Area that the City of Oakland’s program requiring developers to contribute 1% of the cost of a development project to public art violated the First Amendment.  In an unpublished opinion, the circuit... Continue Reading...

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