Legal Question in Real Estate Law in California

Real Estate Development Que:

I have a very unique real estate development that will solve many current problems that we have in the world.. ie jobs, income for government agencies, electricity generation, green and eco for the environment etc etc.

This is a well-developed project but, it's in pre-construction stage, meaning that I don't have the land yet or any permits (which is done on purpose to reduce risk for everyone).

I want to pre-sell the VIP Luxury Condos and commercial space in advance, ie take orders and reservations in advance to show investors and government agencies that we have a viable and well-funded project. But, I don't just want to take reservations, I want to have buyers and lessees actually put down a deposit.

My Question: If I use an independent Escrow Company and have a an escrow agreement with all condo buyers and lessees that's very protective (meaning that I can't have access to any funds unless we reach a specific sales amount and secure funding for construction), is this a legal way of developing a real estate development project?

I'm well aware of the current laws regarding Condo developments stating that I can't take any deposits unless I have my construction permits but, I want to use the same strategies and concepts of crowd-funding and protect everyone at the same time by using an independent escrow company and very "solid" escrow instructions.

Thank-you!

Your feedback and recommendations are most appreciated.

San Diego Developer


Asked on 9/12/11, 3:13 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

I don't think a strict escrow policy is a substitute for strict compliance with DRE regulations requiring permits (and more) before taking deposits, but your ultimate ruling on this would have to be from the DRE itself; formulate your proposed escrow and try it out on their enforcement staff.

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Answered on 9/12/11, 4:21 pm


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