Section 71-A. Further trust of funds received or receivable by owner under executory contract for the sale and improvement of real property

1.  As
  used in this section,
    (a) A "contract of sale" is an executory contract for the sale of real
  property  and  the improvement thereof by the construction of a building
  thereon.
    (b) "Advances" include funds received by the owner and his  rights  of
  action for payment thereof.
    2.  (a)  Advances made by or on behalf of a vendee of real property to
  the owner under or pursuant to  a  contract  of  sale  shall  constitute
  assets  of  a  trust,  as defined in this section, of which the owner is
  trustee, notwithstanding that such advances may  also  be  assets  of  a
  trust defined in section seventy of this chapter.
    (b)  Such  advances  shall  be  held  and applied by the owner for the
  payment of  the  cost  of  improvement.  The  trust  claims  defined  in
  subdivision  three (a) of section seventy-one of this chapter shall have
  priority over trust claims which the vendee has under the further  trust
  provided  in  this  section.  Advances  shall cease to be subject to the
  further trust provided in this section after they have been  applied  by
  the  owner for payment of the cost of improvement, provided that no part
  of the advances shall be applied or be deemed applied for payment of the
  cost of improvement until all trust assets, as defined  in  subdivisions
  five  (a)  to  five  (f), inclusive, of section seventy of this chapter,
  which have been received by the owner from all other sources, have  been
  exhausted.
    (c)  Such advances, or any portion thereof remaining after application
  of such advances for payment of the cost of improvement, shall  continue
  to  be  held  in trust by the owner for the benefit of the vendee, until
  the trust is terminated (i) by the owner's performance of the  terms  of
  the  contract  of  sale, or (ii) by a default of the vendee excusing the
  owner's performance of the terms of the contract of sale,  or  (iii)  by
  release or discharge of the owner's liability to refund such advances to
  the vendee.
    (d) Until the further trust is terminated as provided in this section,
  such  advances  shall  not be applied by the owner for any purpose other
  than payment  of  the  cost  of  improvement  and  satisfaction  of  any
  liability  of the owner to refund such advances, or any part thereof, to
  the vendee. Upon termination of the said trust, the beneficial  interest
  in  such  advances  or any portion thereof remaining in the hands of the
  owner shall vest in the owner, provided that all trust claims applicable
  to such advances have been paid or discharged.
    (e) Any provision whereby the vendee waives  the  provisions  of  this
  section,  whether  contained in the contract of sale or otherwise, shall
  be absolutely void.
    (f) Subject to the provisions of this section, the rights and remedies
  which may be exercised by a holder  of  trust  claims  with  respect  to
  assets  of  a  trust  defined  in section seventy of this chapter may be
  exercised, in the same manner and to the same extent, by the vendee with
  respect to such advances.
    (g) The enforcement of the trust provided in this section shall not be
  deemed to prohibit the vendee from seeking to enforce such additional or
  alternative remedies provided by law as shall afford the vendee complete
  relief.
    3. (a) The initial advance pursuant to a contract of sale which by its
  terms provides for or is incidental to  a  contract  providing  for  the
  construction  on  the  subject  real property of residential condominium
  unit or any structure designed solely for residential occupancy  of  not
  more  than  two  families living separately, on property to be purchased

  shall, at the vendee's option, be deposited within  five  business  days
  thereafter  by  the recipient in an interest bearing escrow account in a
  bank, trust company, savings bank, state or  federal  savings  and  loan
  association,  located  in  this  state.  Such deposit, together with the
  interest accumulated thereon, shall remain the property  of  the  vendee
  except  as  otherwise  provided  herein.  The recipient shall advise the
  vendee in writing of the name of the depository  where  the  funds  have
  been placed within ten business days after such deposit has been made.
    (b)  In lieu of making the deposit of such moneys in an escrow account
  as provided in paragraph (a) of this subdivision, the recipient may post
  with the vendee a bond or contract of  indemnity,  issued  by  a  surety
  company   licensed   to  execute  such  an  instrument  in  this  state,
  guaranteeing the return of the moneys which otherwise would be  required
  to  be  deposited  in  such  escrow account, in which case the recipient
  shall not be required to deposit such money in an escrow  account.  Said
  bond  or  contract  of indemnity shall be delivered to the vendee within
  ten business days after receipt of the initial advance.
    (c) At any time after making the deposit of such moneys in the  escrow
  account,  the  recipient  may post with the vendee a bond or contract of
  indemnity issued by  a  surety  company  licensed  to  execute  such  an
  instrument  in  this  state  guaranteeing  the return of such moneys, in
  which case the recipient shall not be required to maintain  the  deposit
  of such moneys in such account.
    (d)  Such advance shall be retained in the escrow account or such bond
  or contract  of  indemnity  continued  in  effect  until  the  trust  is
  terminated  (i)  by  the  recipient's  performance  of  the terms of the
  contract of sale,  or  (ii)  by  default  of  the  vendee  excusing  the
  recipient's  performance  of the terms of the contract of sale, or (iii)
  by release or discharge of the  recipient's  liability  to  refund  such
  advance  to  the  vendee,  or  (iv)  upon  transfer of title of the real
  property to the vendee.
    (e) Every contract of sale which by  its  terms  provides  for  or  is
  incidental  to  a contract providing for the construction on the subject
  real property of a residential condominium unit or a structure  designed
  solely  for  the  residential  occupancy  by  not more than two families
  living apart, shall contain a  statement  advising  the  vendee  of  the
  provisions  of this subdivision. Such statement shall be printed in bold
  type which is at  least  two  points  larger  than  any  other  printing
  contained thereon and shall read as follows:
     "YOU, AS THE PURCHASER OF THIS RESIDENCE, MAY REQUIRE THE RECIPIENT
    OR CONTRACTOR TO DEPOSIT THE INITIAL ADVANCE MADE BY YOU IN AN ESCROW
        ACCOUNT. IN LIEU OF SUCH DEPOSIT, THE RECIPIENT OR CONTRACTOR
              MAY POST A BOND OR CONTRACT OF INDEMNITY WITH YOU
                  GUARANTEEING THE RETURN OF SUCH ADVANCE."
    4.  (a)  Under  a home improvement contract, payments received from an
  owner  by  a  home  improvement  contractor  prior  to  the  substantial
  completion  of  work  under  the contract shall be deposited within five
  business days thereafter by the recipient in  an  escrow  account  in  a
  bank,  trust company, savings bank, or state or federal savings and loan
  association, located in this state. No depository institution acting  on
  the instructions or otherwise dealing with a home improvement contractor
  shall  be  obliged  to  inquire  into  the  validity or propriety of any
  deposits to or withdrawals from any escrow account  established  by  the
  home  improvement  contractor  in compliance with this subdivision or to
  insure that any withdrawals  from  such  account  are  applied  for  any
  specific  purpose  or  purposes by the home improvement contractor. Such
  deposit or deposits shall remain the property of such  owner  except  as
  otherwise   provided   herein.  Unless  the  home  improvement  contract

  specifies the name of the depositary where the funds will be placed,  no
  later  than  ten  business  days  after  the  deposit has been made, the
  recipient shall  advise  the  owner  in  writing  of  the  name  of  the
  depositary  where the funds have been placed. The recipient shall not be
  required to keep in  separate  depositary  accounts  the  funds  of  the
  separate  owners  from  whom  payments  have been received, provided his
  books of account shall clearly show the allocation to each owner of  the
  funds  deposited  in  his  general  or  special  depositary  account  or
  accounts.
    (b) In lieu of making the deposit of such payment or  payments  in  an
  escrow  account  as  provided  in paragraph (a) of this subdivision, the
  recipient may post with the owner  a  bond  or  contract  of  indemnity,
  issued  by  a  surety  company licensed to execute such an instrument in
  this state, or an irrevocable letter of credit issued by a  bank,  trust
  company,  savings bank, or state or federal savings and loan institution
  located in this state, guaranteeing the return of the payments,  or  the
  proper  application  of  the  payments  to the purposes of the contract,
  which otherwise would  be  required  to  be  deposited  in  such  escrow
  account,  in  which  case the recipient shall not be required to deposit
  such payments in an escrow account. Said bond or contract  of  indemnity
  or  irrevocable  letter of credit shall be delivered to the owner within
  ten business days after receipt of the payment.
    (c) At any time after making the deposit of such payment  or  payments
  in  the  escrow account, the recipient may post with the owner a bond or
  contract of indemnity issued by a surety  company  licensed  to  execute
  such  an  instrument  in  this state, or an irrevocable letter of credit
  issued by a bank, trust company,  savings  bank,  or  state  or  federal
  savings  and  loan  institution  located in this state, guaranteeing the
  return or proper application of such payment  to  the  purposes  of  the
  contract,  in which case the recipient shall not be required to maintain
  the deposit of such payment in such account.
    (d) Such deposit or deposits shall remain the property of the owner or
  such bond or contract of  indemnity  or  irrevocable  letter  of  credit
  continued   in   effect  until  (i)  the  proper  payment,  transfer  or
  application of such deposits by the contractor to the  purposes  of  the
  home  improvement  contract  under  the  schedule  of  payments provided
  therein; or (ii) the  default  or  breach  of  the  owner  excusing  the
  recipient's  performance  of the terms of the home improvement contract,
  but only to the extent of any reasonable  liquidated  damage  amount  as
  defined in section 2-718 of the uniform commercial code and set forth in
  the  contract,  and  only  after  seven days prior written notice to the
  owner; or (iii) substantial performance of the contract.
    (e) The recipient shall not withdraw deposits from the escrow  account
  in  excess  at  any  time  of  the total amount shown in the schedule of
  payments in the home  improvement  contract.  The  amount  of  any  such
  progress  payments shall bear a reasonable relationship to the amount of
  work to be performed, materials purchased, or  expenses  for  which  the
  contractor would be obligated.
    (f)   If   the  home  improvement  contract  provides  that  the  home
  improvement contractor will be paid on a specified hourly or time  basis
  for work that has been performed or charges for materials that have been
  supplied  prior  to the time that payment is due, this subdivision shall
  not apply to such payments for such work or materials.
    (g) Failure to place customer deposits in escrow, except  as  provided
  herein, shall constitute a violation of this section.