2.6 Condominium & Cooperative Escrow: Developer Deposits and Statutory Cancellation Rights

2.6 Condominium & Cooperative Escrow: Developer Deposits and Statutory Cancellation Rights

Core Principle: Condominiums is a named sub-topic under Escrow Management in the DBPR broker outline. Condominium deposits behave differently from ordinary earnest money in two respects: the developer is subject to its own statutory escrow regime under Chapter 718, and the buyer holds statutory cancellation rights that override the contract.

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1. Developer Deposits — F.S. 718.202

Where a developer contracts to sell a condominium parcel that is not substantially completed in accordance with the plans, specifications, and disclosures, Chapter 718 imposes a two-tier escrow structure.

   BUYER'S PAYMENTS TOWARD THE PURCHASE PRICE
                    |
     +--------------+-----------------------+
     |                                      |
  FIRST 10% OF SALE PRICE          AMOUNTS ABOVE 10%
  Paid into an ESCROW ACCOUNT      Held in a SPECIAL ESCROW ACCOUNT
  (or secured by surety bond       controlled by an escrow agent;
   or irrevocable letter of        may NOT be used by the developer
   credit in an equal amount)      before closing, EXCEPT for actual
     |                              construction costs where the
     |                              contract so provides and
     |                              construction has begun
     |                                      |
     +--------------- RELEASE RULES --------+

Release of Escrowed Funds

The Above-10% Tier

Payments in excess of 10% of the sale price received before completion of construction go into a special escrow account controlled by an escrow agent and may not be used by the developer before closing — except for refund to the buyer, or as permitted by F.S. 718.202(3). That subsection allows the developer to withdraw the excess funds once construction of improvements has begun and only if the contract so provides, and only for the developer's actual costs incurred in construction and development, a term that expressly includes demolition, site clearing, permit fees, impact fees, and utility reservation fees. If the money stays in the special account more than 3 months and earns interest, the interest is paid under the subsection (1) rules.

[!IMPORTANT] The escrow agent is not necessarily the broker. In a developer condominium sale the escrow agent is usually a title company or attorney designated under F.S. 718.202. Where a licensee prepares or presents the contract and the deposit will be held by a title company or attorney, F.A.C. 61J2-14.008(2)(b) requires the licensee to state that party's name, address, and telephone number on the contract, and triggers the 10-business-day verification chain covered in Section 2.2.

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2. Buyer Cancellation Rights — F.S. 718.503

Chapter 718 gives condominium buyers statutory voidability rights that operate independently of the contract. Two different windows apply, and the exam tests the distinction between them.

[!NOTE] The resale window changed. The non-developer resale cancellation period was 3 days for many years and was extended to 7 days, excluding Saturdays, Sundays, and legal holidays, effective July 1, 2025. Study materials that still print "3 business days" are stale, and 3 days is now a distractor rather than an answer.

The Alternative Resale Clause

F.S. 718.503(2)(d) lets a resale contract satisfy the requirement in either of two ways. It may contain a clause in which the buyer acknowledges having received the required documents more than 7 days, excluding Saturdays, Sundays, and legal holidays, before execution of the contract — in which case no cancellation window opens — or it may contain the voidability clause giving the 7-day cancellation right. A resale contract that conforms to neither is voidable at the option of the purchaser before closing.

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3. Why This Matters to the Escrow Rules

When a condominium buyer cancels within the statutory window, the broker holding the deposit faces what looks like conflicting demands: the buyer wants the money back and the seller says the contract is binding. Florida resolves it in the broker's favour.

F.S. 475.25(1)(d)1. provides that if the buyer of a residential condominium unit delivers to a licensee written notice of the buyer's intent to cancel the contract for sale and purchase as authorized by s. 718.503, the licensee may return the escrowed property to the purchaser without notifying the Commission and without employing any of the four settlement procedures. The same sentence extends the identical treatment to a buyer of real property who in good faith fails to satisfy the terms in the financing clause of a contract.

[!IMPORTANT] The exemption is only as good as the timing. A broker who releases a deposit to a buyer whose cancellation notice arrived on day 9 of a 7-business-day resale window has not used an exemption; the broker has disbursed against a live conflicting demand. Diary the statutory deadline from the later of the two triggering events, and keep the signed document receipt in the file — the broker must in any event retain transaction records for 5 years under F.S. 475.5015.

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4. Cooperatives

Florida cooperatives are governed by Chapter 719 rather than Chapter 718, and the structures parallel one another closely. The practical differences a broker must hold in mind:

Because a cooperative interest is personal property, the conveyancing mechanics differ — but a Florida real estate licence is still required to broker the transaction, and deposits taken by the broker remain trust funds subject to the full 61J2-14 escrow regime.