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(A) Purpose of section. The purpose of this section is to protect future residents from the loss of deposits on the purchase of their dwelling by providing for the maintenance of escrow accounts or, in lieu thereof, providing for surety or letters of credit to secure the deposits until closing of the dwelling unit by the purchaser.
(B) Requirement of escrow.
(1) The developer shall be required to place in an escrow account, with a person, firm, or institution having a bona fide fiduciary obligation, all deposits received towards the purchase of any dwelling unit constructed or to be constructed within the city. The deposits shall be released from escrow upon or simultaneously with the closing of the unit.
(2) The developer shall submit to the Chief Building Official, with the developer's application for permit, evidence from the escrow agent that the deposits are placed in an escrow account. If the developer desires to secure a building permit prior to the sale of a dwelling unit, the developer shall deposit with the Chief Building Official a bond as provided in division (B)(3) below. At the time of sale of the unit, the developer may request and the Chief Building Official shall release the bond upon evidence that the deposits have been placed in escrow.
(3) In lieu of placing the purchaser's deposits in escrow, the developer may deposit with the Chief Building Official a bond, approved as to form and substance by the City Attorney, in the form of cash, letter of credit, or other collateral, which shall be held as security for the deposits. That bond shall be in an amount greater than the amount of the deposit or 5% of the selling price of the dwelling unit. Where a developer is building multiple units simultaneously, the aggregate amount of all bonds shall not be required to exceed $100,000 per subdivision. The city shall release the bonds upon the closing of the unit.
(Ord. 87-6, passed 5-20-87; Am. Ord. 1072, passed 5-4-94)