38 U.S.C. § 3706: Escrow of deposits and…

Summary

Sellers or their agents must put any deposit or downpayment a qualified veteran gives for a new, never-lived-in home in a project that has a Certificate of Reasonable Value into a trust account right away. This keeps the money safe from the seller’s creditors until it is used for the buyer at closing or handled as the contract says. Not doing this can be treated as an unfair marketing practice. If a veteran hires someone to build a home in such a project and will use a construction loan under the same rules, the deposit must be kept in a special trust account until it is applied to the land or building costs, or handled under the contract. Failing to keep the money in that account can also be an unfair marketing practice.

Title 38, §3706

Veterans' Benefits, Source: USLM XML via OLRC

(a)Any deposit or downpayment made by an eligible veteran in connection with the purchase of proposed or newly constructed and previously unoccupied residential property in a project on which the Secretary has issued a Certificate of Reasonable Value, which purchase is to be financed with a loan guaranteed, insured, or made under the provisions of this chapter, shall be deposited forthwith by the seller, or the agent of the seller, receiving such deposit or payment, in a trust account to safeguard such deposit or payment from the claims of creditors of the seller. The failure of the seller or the seller’s agent to create such trust account and to maintain it until the deposit or payment has been disbursed for the benefit of the veteran purchaser at settlement or, if the transaction does not materialize, is otherwise disposed of in accordance with the terms of the contract, may constitute an unfair marketing practice within the meaning of section 3704(b) of this title.

(b)If an eligible veteran contracts for the construction of a property in a project on which the Secretary has issued a Certificate of Reasonable Value and such construction is to be financed with the assistance of a construction loan to be guaranteed, insured, or made under the provisions of this chapter, it may be considered an unfair marketing practice under section 3704(b) of this title if any deposit or downpayment of the veteran is not maintained in a special trust account by the recipient until it is either (1) applied on behalf of the veteran to the cost of the land or to the cost of construction or (2), if the transaction does not materialize, is otherwise disposed of in accordance with the terms of the contract.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1994—Pub. L. 103–446, which directed the substitution of “of this title” for “of this chapter” the second and third places appearing, was executed by making the substitution the second and fourth places appearing to reflect the probable intent of Congress. 1991—Pub. L. 102–83, § 5(a), renumbered section 1806 of this title as this section. Pub. L. 102–83, § 5(c)(1), substituted “3704(b)” for “1804(b)” in subsecs. (a) and (b). 1989—Pub. L. 101–237 substituted “Secretary” for “Administrator” wherever appearing. 1976—Subsec. (a). Pub. L. 94–324 substituted “the seller’s” for “his”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1976 AmendmentAmendment by Pub. L. 94–324 effective June 30, 1976, see section 9(a) of Pub. L. 94–324, set out as a note under section 3701 of this title.

§3706 Escrow of Deposits and Downpayments