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(a) If the encumbering instrument does not contain adequate release clauses, the lien, mortgage, or other encumbrances will be considered objectionable unless adequate reserves are maintained in a trust or escrow account. In determining the adequacy of the account, the department will be guided by the facts and circumstances of each individual case, but the account must comply with the following:
(1) funds shall be kept and maintained in an account separate and apart from the developer's personal funds;
(2) the account shall be established in a bank or trust company doing business in this state, or another state where the account is required to be maintained there by the laws of that state and approved by the department;
(3) statements shall be furnished to the department on a semiannual basis;
(4) the trust or escrow agreement shall state that its purpose is to protect the purchaser or prospective purchaser in case of default on a lien, mortgage or other encumbrance, and shall authorize the department to inspect the records of the trustee relating to the agreement, and that upon order of the department, or a court, the trustee shall release and pay over the funds to the department, or the holder of the blanket encumbrance.
(b) The department will execute an acknowledgment on the face of each agreement. This acknowledgment indicates approval of the form and content of the agreement, but will not make the department a party to the agreement.
History: Eff. 4/3/76, Register 58
Authority: AS 34.55.010 (a)
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Last modified 7/05/2006