§ 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.