Texas Senate Bill SB1407

Texas 2025 - 89th Regular

• Filed: 2/19/25

Caption

Relating to the withdrawal of certain deposits placed in escrow in connection with the purchase or reservation of a condominium unit.

Impact

The legislation is intended to streamline the construction process for condominium developments in Texas by providing developers with immediate access to funds that are critical for initiating construction. By allowing declarants to use these deposits for construction expenses, the bill aims to reduce delays in project timelines, which can be critically important in a competitive real estate market. However, this also places significant trust in the maintenance of adequate surety bonds or insurance to protect buyers, which could be a point of concern for some stakeholders.

Summary

SB1407 amends Section 82.158 of the Property Code, specifically addressing the management and withdrawal of escrow deposits made in connection with the purchase or reservation of condominium units. The primary change allows declarants to withdraw escrow funds once construction begins on the units, provided that they maintain a surety bond or insurance that covers the amount of the deposit. This adjustment aims to facilitate the cash flow for developers, enabling them to utilize upfront deposits for construction costs without having to wait until closing to access these funds.

Contention

Despite its potential benefits, SB1407 introduces notable points of contention among stakeholder groups, particularly concerning buyer protections. Critics may argue that permitting developers to withdraw substantial deposits before closing exposes buyers to increased risk, especially if projects face delays or cancellations. The effectiveness of the required surety bonds and insurance in genuinely safeguarding consumer interests may be hotly debated, as buyers will need to ensure that these measures offer sufficient protection in practice.

Texas Constitutional Statutes Affected

Property Code

• Chapter 82. Uniform Condominium Act
  • Section: 158