55-342 - Blanket encumbrances. - Virginia Statutes

§ 55-342. Blanket encumbrances.

A. It shall be unlawful for any developer or agent to sell or lease lots in asubdivision that is subject to a blanket encumbrance unless the blanketencumbrance or effective supplemental agreement contains a release provisionpermitting legal title to individual lots or other interest contracted for tobe obtained free and clear of the blanket encumbrance. Nothing herein shallbe construed to limit the conditions upon which such release may be premisedor the modification or amendment of such release provision as to (i) anypurchaser other than a purchaser under an installment sales contract; or (ii)purchasers under installment sales contracts which are executed subsequent tothe recordation of the amendment or modification.

B. Unless blanket encumbrance release provisions provide that the lien of theblanket encumbrance is subordinate to the rights of persons purchasing fromthe developer or agent and that those purchasers have the unconditional rightto obtain legal title or other interest contracted for free and clear of theblanket encumbrance upon compliance with the terms and conditions of thepurchase or lease, it shall be unlawful for a developer or agent to sell orlease lots unless one of the following conditions is complied with:

1. Any earnest money deposit or advance or other payment made by thepurchaser on account of the purchase of a lot is placed in an escrow accountwhich fully protects the interest of the purchaser until either:

a. Fee title or other interest contracted for is conveyed to the purchaserfree and clear of the blanket encumbrance; or

b. Either the developer or purchaser defaults under the contract and a finaldetermination as to the dispersal of sums paid is made by either a court ofcompetent jurisdiction; or

c. The developer voluntarily orders the return of the money to the purchaser.Such escrow shall be held in a trust account maintained in a federallyinsured depository located in the Commonwealth of Virginia.

2. Title to the subdivision is held in trust under a trust agreement until aproper release is obtained and legal title or other interest contracted foris conveyed to the purchaser.

(1978, c. 510; 1980, c. 546; 1996, c. 372.)