§ 18-14-408 - Guarantees for completion of time-share projects.
18-14-408. Guarantees for completion of time-share projects.
(a) If a developer contracts to sell a time-share interval and the construction, furnishings, and landscaping of the time-share project have not been substantially completed in accordance with the representations made by the developer in the disclosures required by this chapter, the developer shall:
(1) Pay into an escrow account established and held in this state, in an account designated solely for the purpose, by an independent bonded escrow company, or in an institution whose accounts are insured by a governmental agency or instrumentality, all payments received by the developer from the purchaser towards the sale price until the project is substantially complete. The escrow agent may invest the escrow funds in securities for the United States, or any agency thereof, or in savings or time deposits in institutions insured by an agency of the United States. Funds shall be released from escrow as follows:
(A) If a purchaser properly terminates the contract pursuant to its terms or pursuant to this chapter, the funds shall be paid to the purchaser, together with any interest earned;
(B) If the purchaser defaults in the performance of his or her obligations under the contract of purchase and sale, the funds shall be paid to the developer, together with any interest earned; or
(C) If the funds of a purchaser have not been previously disbursed in accordance with the provisions of this subsection, they may be disbursed to the developer by the escrow agent upon substantial completion of the time-share project;
(2) The developer shall not be required to comply with subdivision (a)(1) of this section when the agency has been furnished and is satisfied that all of the following provisions have been met:
(A) That the developer is an Arkansas corporation or a foreign corporation qualified to do business in Arkansas;
(B) That the corporation has been in existence and operated for not less than three (3) years within the State of Arkansas;
(C) That the corporation has net assets within this state of an amount not less than three (3) times the cost to complete the time-share project; and
(D) The agency shall have the discretion to require such other assurances as may reasonably be required either to assure completion of the time-share project or to reimburse the purchaser all funds paid to the developer together with any interest earned; and
(3) (A) In lieu of any escrows required by this section, the agency shall have the discretion to accept other financial assurances including, but not limited to, a performance bond or an irrevocable letter of credit in an amount equal to the cost to complete the time-share project.
(B) Interest earned on any such bond, letter of credit, deposit, or other instrument while deposited with, or for the benefit of, the agency shall become the separate property of the agency and shall be deposited in the Real Estate Recovery Fund created in 17-42-403.
(b) For the purpose of this section, "substantially completed" means that all amenities, furnishings, appliances, and structural components and mechanical systems of buildings on all real property dedicated to the project and subject to the project instruments are completed and provided as represented in the public offering statement, that the premises are ready for occupancy, and that the proper governmental authority has caused to be issued a certificate of occupancy.