By the Mountain Cove Homes team · Miami, Florida
The first money you hand a builder is also the least understood. A new construction deposit in Florida sits in a specific legal position, created by one statute written in 1980 and barely touched since, and that position is narrower than most buyers assume.
It is narrower in three directions at once. The protection covers only part of the money, it can be signed away in a single line of the contract, and it does not cover the buyer at all if the seller is small enough.
None of that is a reason to walk away. It is a reason to read four sentences of your contract before you sign, and to know which four.
The ongoing cost of the finished house is in the full cost of owning a home in Miami-Dade, and the shape of the whole transaction is in how buying pre-construction actually works. This is the money at the front of it.
Reservation and Deposit Are Not the Same Instrument
A reservation typically holds a lot or a plan while paperwork is prepared. A deposit is consideration under a signed purchase agreement. The words get used interchangeably in sales offices, and they are not interchangeable in law.
The distinction matters because the statute that protects deposits attaches to a contract. Florida’s escrow requirement applies to “offers to purchase, sales agreements, or written contracts made between a building contractor or a developer and a prospective buyer” of a one-family or two-family residential dwelling unit.
Money handed over before any of those documents exists is governed by whatever the reservation form says, and often that form says very little. Ask which document your payment attaches to, and ask before you write the check.
The Escrow Right Is Real, and It Is Capped at Ten Percent
Here is the sentence that does the work. Florida requires the builder or developer to notify you that any deposit, up to 10 percent of the purchase price, shall, unless waived in writing by the buyer, be deposited in an escrow account.
Two limits are built into that one clause. The protection stops at ten percent of the purchase price, and it is waivable.
The statute even prescribes the exact language the contract must carry, in conspicuous type: the buyer of a one-family or two-family residential dwelling unit has the right to have all deposit funds, up to 10 percent of the purchase price, deposited in an escrow account, and this right may be waived, in writing, by the buyer.
If you cannot find that legend in your contract, that is your first question for the sales office. If you can find it and it has been struck through or initialed away, that is a bigger one.
What Happens to the Part Above Ten Percent
Nothing in the single-family statute protects it. The escrow right is expressed as a ceiling, and money above that ceiling falls outside the section entirely.
On a $520,000 home, ten percent is $52,000. A deposit structure that asks for $75,000 across two payments leaves roughly $23,000 governed by contract alone.
That is not necessarily wrong, and builders have legitimate reasons to ask for it. It is simply a different kind of money, and you should know which part of your deposit is which before the second payment is due.
How Escrowed Money Can Legally Leave the Account
Two mechanisms, and they are worth knowing separately.
The default is dual control. The statute provides that all withdrawals from the account shall require the signatures of both the building contractor or developer and the buyer or the buyer’s agent, except as the section otherwise allows.
The exception is the one that matters. When a builder wants to spend escrowed funds on construction, the statute requires that, after notifying the buyer, the builder acquire a surety bond issued by a company licensed to do business in this state, if such a bond is readily available in the open market, payable to the buyer in the amount of the escrow deposit, and only then are the funds released for construction purposes.
If no bond is available, the statute permits a loan arrangement instead, with the buyer bearing up to twelve months of interest at closing and receiving credit for interest earned on the escrow. A master surety bond is also permitted, with the premium debited to the buyer at closing.
So the honest description is not that escrowed money is frozen. It is that escrowed money can be spent, and when it is, something is supposed to stand behind it.
Not Everyone Is Allowed to Hold It
The statute lists the permitted holders, and the list is closed: a savings and loan association, bank, or trust company, an attorney who is a member of The Florida Bar, a licensed Florida real estate broker, or a title insurance company authorized to insure title to real property in this state.
For single-family construction, the statute permits those funds to be deposited in separate accounts or commingled with other escrow or trust accounts, and it does not require the escrow agent to be independent of the builder.
Condominiums are stricter on exactly that point. Chapter 718 requires that every escrow agent shall be independent of the developer, and no developer or any officer, director, affiliate, subsidiary, or employee of a developer may serve as escrow agent.
That gap between the two chapters is real, and it is one of the few places where a condominium buyer is better protected than a house buyer.
Chapter 718 also restricts where the money may sit, permitting investment only in securities of the United States or an agency thereof or in accounts in institutions the deposits of which are insured by an agency of the United States. The single-family statute imposes no equivalent limit.
The condominium structure differs above ten percent as well. Amounts over the ten percent floor may not be used by the developer prior to closing the transaction except as the chapter allows, and where the contract so provides the developer may withdraw them once construction of improvements has begun and spend them on actual construction costs.
Even then the permitted uses are bounded. No part of those funds may be used for salaries, commissions, or expenses of salespersons; for advertising, marketing, or promotional purposes; or for loan fees and costs, principal and interest on loans, attorney fees, accounting fees, or insurance costs. The contract must carry a boldface legend on its first page warning that money above ten percent may be used for construction.
The Exemption Nobody Mentions in the Sales Office
This is the carve-out that decides whether any of the above applies to your transaction, and it is buried in the definitions rather than announced as an exemption.
The statute defines a building contractor as a person who, for compensation, constructs and sells one-family or two-family residential dwelling units, except for a person who sells or constructs less than 10 units per year statewide. The definition of developer carries the identical exception.
Read the consequence. A seller below that threshold is not a building contractor or a developer for purposes of the section, so the escrow requirement, the prescribed legend and the withdrawal rules do not reach them at all.
Statewide is the operative word. It counts a seller’s total annual output across Florida, not the size of the community you are buying in, so a small community built by a high-volume builder is inside the statute and a large community built by a small one may not be.
Nor is annual unit count something a buyer can look up in a single public record. So the question belongs in the sales office, in writing, alongside the question of who holds the escrow: does this seller build or sell ten or more units per year statewide, and if not, what does the contract provide in place of the statutory protection.
Two More Exemptions, and One Rule for Broker-Held Money
The section names its own exceptions in a subsection titled exemptions, and there are two. It does not apply to deposits placed in an escrow account required by the Federal Housing Administration or the United States Department of Veterans Affairs, nor to deposits made to licensed real estate brokers under the section, which shall instead be deposited in accordance with the provisions of chapter 475.
That second redirect matters if a broker is in your transaction. Chapter 475 obliges a broker to immediately place, upon receipt, any money, fund, deposit, check, or draft entrusted to her or him by any person dealing with her or him as a broker in escrow with a title company, banking institution, credit union or savings and loan located and doing business in Florida — or to deposit them in a trust or escrow account the broker maintains with such an institution.
The word is immediately, and the funds are then held until disbursement is properly authorized. Failure to do so is a ground for discipline against the licence.
The Interest Goes to the Builder
This one surprises almost everyone, so it is worth stating plainly. Under the single-family statute, the building contractor or developer shall be entitled to any interest accrued by the account, payable at closing.
The exceptions run the other way only in specific cases. If you properly terminate the contract under its terms, the funds are paid to you including any accrued interest. And where the builder borrowed in lieu of posting a bond, you are credited for interest accrued on the escrow.
Condominiums follow a parallel default. Chapter 718 provides that if the contract does not provide for the payment of any interest earned on the escrowed funds, interest shall be paid to the developer at the closing.
Over an eighteen-month build on a $52,000 escrow, that is a real number. It is also negotiable, because it is a default rule and not a prohibition.
Getting the Money Back Depends on Your Contract, Not the Statute
This is the most important misunderstanding to clear. The statute contains no cooling-off period, no rescission right and no refund deadline for a single-family purchase.
What it says is conditional on the document you signed: if the buyer properly terminates the contract pursuant to its terms, the funds, including any accrued interest, shall be paid to the buyer. The words that carry the weight are pursuant to its terms.
Your exit rights are the ones written into the purchase agreement — financing contingency, appraisal, inspection, outside completion date — and nowhere else. Florida did not supply a default escape hatch on a house, which is why reading the purchase agreement clause by clause is the step that actually protects the money.
Going the other direction, the builder cannot simply take the money either. On a claimed buyer default, the statute requires written notice by certified mail at least 72 hours before withdrawal, together with an affidavit of the buyer’s default and the builder’s own non-default.
One more line closes the back end. Once the sale closes, the buyer shall then have no right to place a claim on any escrowed funds for breach of contract. Deposit disputes are a pre-closing instrument.
What Happens When the Escrow Rule Is Broken
The enforcement here is unusually sharp for a consumer statute, which tells you something about why it was written.
A developer who wilfully fails to comply with the provisions concerning establishment of an escrow account, deposits into escrow, or withdrawals from escrow commits a felony of the third degree.
The statute also supplies its own evidentiary shortcut. Failure to place funds in an escrow account, where required, within 10 days after receipt by the developer of such funds is prima facie evidence of a violation.
Ten days is therefore a date you can check. Ask when your funds were deposited and with whom, and keep the answer.
Civil enforcement is attached too, with the prevailing party entitled to recover attorney’s fees in an action under the section. And the escrow holder is insulated from the builder’s spending decisions: no escrow holder, bonding company, or lending institution referred to in this section shall be chargeable with the use to which a builder or developer puts escrowed funds.
One structural point closes the topic. The section states that its provisions constitute maximum statewide standards, which means Miami-Dade cannot adopt a stricter local deposit rule. What the state provides is the ceiling of your statutory protection, not the floor.
Where the Cancellation Rights Actually Live
Not here, which is the point. The deposit statute creates no window, and the two windows that exist come from disclosure statutes rather than from anything about your money.
One attaches to a late homeowners’ association disclosure and runs three days. The other attaches to a condominium purchase from a developer and runs fifteen. Both are set out, side by side, in reading a new construction purchase agreement, because they are contract clauses rather than deposit rules.
What matters for the deposit is only the consequence. If a window applies and you use it, you have terminated pursuant to the contract’s terms, which is the condition the refund provision turns on.
If no window applies, the termination clauses you negotiated are the whole of your exit. The dues that trigger the first of those disclosures are explained in what HOA fees cover in Miami-Dade.
New Construction Deposit in Florida: Where to Slow Down
A contract with no conspicuous escrow legend anywhere in it, or one where the waiver box was completed before you arrived.
Nobody in the sales office able to say which portion of your deposit is inside the statutory ceiling and which is not.
An escrow agent who is not one of the five permitted holders, or whose identity nobody can name.
A reservation payment taken before any purchase agreement exists, on a form that does not say what happens if you walk.
A verbal assurance that the deposit is “fully refundable.” Refundability lives in the contract’s termination clauses, and if it is not written there, it is not a right.
Frequently Asked Questions
How much of your deposit is protected by Florida law?
Up to ten percent of the purchase price on a one-family or two-family dwelling, and only if you have not waived the escrow right in writing. Money above ten percent is governed by the contract alone, and the escrow right itself is expressly waivable.
Can you waive the escrow right on a new construction deposit?
Yes. The statute states the right may be waived, in writing, by the buyer, and the prescribed contract legend says so directly. Check whether the waiver has already been built into the form you are being asked to sign.
Who is allowed to hold your deposit in Florida?
A savings and loan association, bank or trust company; an attorney who is a member of The Florida Bar; a licensed Florida real estate broker; or a title insurance company authorized to insure title in Florida. For a single-family home the escrow agent is not required to be independent of the builder.
Who receives the interest earned on an escrowed deposit?
The builder or developer, payable at closing, unless the contract says otherwise. If you properly terminate the contract under its terms, the funds are returned to you together with any accrued interest.
Is there a cooling-off period on a new construction contract in Florida?
Not from the deposit statute, which creates no cancellation window at all. Two disclosure statutes do — fifteen days on a condominium purchase from a developer, three days where a homeowners’ association disclosure was late — but neither is a general right to cancel a house contract.
Can a builder spend your escrowed deposit before closing?
Yes, under conditions. After notifying the buyer, the builder must obtain a surety bond payable to the buyer in the amount of the deposit, if one is readily available, and only then may the funds be released for construction purposes.
The deposit is the one moment in the transaction where you have leverage and the paperwork is short enough to read in full. Spend the twenty minutes there rather than at closing, when every term has already hardened.
About Mountain Cove Homes. Mountain Cove Homes is a boutique home builder based in Miami, Florida, building single-family homes and townhomes in small communities across Miami-Dade County — including Golden Park and other communities currently selling. Its personnel have been constructing homes in South Florida since the early 1980s. More about how the company works and where it builds.
This article is general information about property taxes, insurance and community assessments in Florida. It is not tax, legal, insurance or mortgage advice. Figures and statutes change, and the amounts that apply to a specific property depend on that property. Verify your own situation with your own attorney and your closing agent before relying on any of it.
For additional legal disclaimers please see the legal information document.
Talk to Mountain Cove Homes
Mountain Cove Homes is a boutique home builder in Miami, Florida, building single-family homes and townhomes in small communities across Miami-Dade County — most of them with no HOA and no CDD tax. If you want to walk through lot availability, pricing, and what is included at this stage of construction, we will give you the numbers directly.
Office 4878 Southwest 74th Court, Miami, FL 33155 786.458.1805 [email protected]
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