Section 16-106-34 - Escrow account required for deposit of purchaser's funds, notes, and contracts(a) A developer for a time share plan shall establish and maintain an escrow account for the deposit of all funds, negotiable instruments, and purchase money contracts received before closing from or on behalf of purchasers or prospective purchasers of interests in the time share plan. The developer or sales agent designated by the developer for the time share plan, resale agent, however, may hold until the expiration of the seven-day cancellation period provided by section 514E-8, HRS, and section 16-106-20, or any longer purchaser cancellation period provided in the sales contract, a negotiable instrument or purchase money contract made by a purchaser: (1) For which subsequent holders cannot claim holder in due course status within the meaning of article 3 of chapter 490, HRS; or(2) Where the payee is: (B) The trustee of a lien payment trust established pursuant to section 514E-19, HRS.(b) The escrow agent must be a bank, savings and loan association, or trust company authorized to do business in the State, or a corporation licensed as an escrow depository under chapter 449, HRS. In connection with sales made out of the State for the use of time share units located in the State, however, the escrow account may be established and maintained in the jurisdiction where the sale is executed if the law of the jurisdiction requires it; provided that the out-of-state escrow agent shall be subject to the approval of the director.(c) The establishment of the escrow account shall be evidenced by a written escrow agreement executed by the developer and the in-state or out-of-state escrow agent; provided that each sales agent designated by the developer for the time share plan shall be made a party to the escrow agreement or shall otherwise agree to obey and be bound by the terms of the agreement. The escrow agreement required under this subsection shall provide for the handling of purchasers' funds, negotiable instruments, and purchase money contracts as required by chapter 514E, HRS, and must include the following provisions: (1) All funds, negotiable instruments, and purchase money contracts received by the developer or sales agent before closing from or on behalf of purchasers or prospective purchasers in connection with the purchase or reservation of any interest or interests in the time share plan shall be placed in the escrow account, subject to the exceptions set forth in section 514E-16(a), HRS, and subsection (a);(2) A complete statement, including a specific citation to the applicable provision of section 514E-19, HRS, of the method to be used to protect purchasers against underlying blanket liens on the time share unit or units;(3) The conditions under which a purchaser's funds, notes, and contracts may be released from escrow without a closing, as specified in section 514E-17, HRS; and(4) The conditions under which a purchaser's funds, notes, and contracts may be released from escrow upon closing, as specified in section 514E-18, HRS; provided that the agreement shall refer specifically to the purchaser protection alternative set forth in section 514E-18(b), HRS, which applies to the time share plan.(d) As required by section 16-106-3(c)(3), a summary of the escrow agreement shall be included in the disclosure statement.(e) A purchaser's funds, negotiable instruments, and purchase money contracts which are required to be placed in an escrow account shall not be expended or released for any purpose prior to closing except for the purposes specified in section 514E-17, HRS.[Eff 11/15/80; am and comp 3/28/85; comp 8/30/85; comp 11/29/85; comp 6/5/87; am and comp 3/7/88; comp 9/15/90] (Auth: HRS §§ 514E-9, 514E-13, 514E-16) (Imp: HRS §§ 514E-16, 514E-17, 514E-18, 514E-19)