P.R. Laws tit. 31, § 1253a
(1) All funds and negotiable instruments received from or on behalf of purchasers pursuant to any purchase contract, shall be held in an escrow account labeled and designated solely for that purpose. Such escrow account shall be established with a financial institution insured by an instrumentality of the federal government and located in Puerto Rico; Provided, however, That in connection with offers and dispositions of timeshares and vacation club rights occurring out of Puerto Rico, the escrow agent may be located in, and the purchasers’ funds and negotiable instruments may be held in, an escrow account in the jurisdiction in which the offer and disposition is made if the law of such jurisdiction requires it. In such event, the out-of-state escrow agent shall be subject to the Company’s approval. The escrow agent shall not be the developer or any affiliate thereof.
(2) The escrow agent shall owe a fiduciary duty to each purchaser to maintain the escrow account in accordance with generally accepted accounting principles and to release the purchasers’ funds only pursuant to this section.
(3) All funds and negotiable instruments shall be held in escrow until:
(a) Delivered to the developer upon the escrow agent’s receipt of an affidavit or declaration under affirmation, subject to the penalties for perjury under the Penal Code, from the developer to the effect that:
(i) The purchaser’s seven (7) day cancellation period has expired without having been properly exercised;
(ii) the accommodation(s) which is (are) the object of the applicable purchase contract is (are) a protected accommodation(s), and
(iii) the project or phase thereof of which said accommodation(s) is (are) a part has (have) been completed, or
(b) delivered to the developer because of the purchaser’s default in the performance of his obligations under the terms of his purchase contract; Provided, That the developer has furnished to the escrow agent an affidavit requesting release of the escrowed funds and negotiable instruments, a copy of which is also furnished to the purchaser. Such affidavit shall include:
(i) A statement that the purchaser has defaulted and that the developer has not defaulted under the terms of the purchase contract;
(ii) a brief explanation of the nature of the default and the date of its occurrence;
(iii) a statement that pursuant to the terms of the purchase contract, the developer is entitled to the purchasers funds and negotiable instruments held in the escrow account, and
(iv) a statement that the developer has not received from the purchaser any written notice of a dispute between the purchaser and the developer or a claim by the purchaser to the escrowed funds and negotiable instruments, or
(c) refunded to the purchaser in the event that such purchaser properly exercises his right to cancel his purchase contract as provided in § 1253 of this title. Such refund shall be made within twenty (20) days after demand therefor by the purchaser or within five (5) days following receipt of funds from the purchaser’s cleared check, whichever occurs later. If the purchaser has received any benefits under his purchase contract prior to the effective date of cancellation, the funds to be returned to the purchaser may be reduced by the value of the contract benefits so received.
(d) for purposes of this section, the timeshare property or the phase thereof for which the timeshare property is sought shall not be considered completed unless and until all physical improvements comprising the timeshare property (or phase) are installed, any refurbishment or remodeling of existing improvements contemplated for the timeshare property (or phase) installed and completed and the common property for the timeshare property (or such phase) are available.
(4) Failure to establish the escrow account, to make the deposits required by this section, or otherwise to comply with the provisions of this section shall constitute a felony punishable by imprisonment in jail for a fixed term of three (3) years. The aforesaid jail term may be increased to five (5) years if aggravating circumstances are present or reduced to a minimum term of six (6) months and one (1) day if extenuating circumstances are present. A court of law may, in its discretion, impose the established jail term, a fine that shall not exceed twenty-five thousand dollars ($25,000), nor shall be less than one thousand dollars ($1,000), or both penalties. Each such violation as to each individual purchaser shall be deemed a separate offense.
(5) In the event that the escrow agent receives conflicting demands for any funds or negotiable instruments held in escrow, the escrow agent shall immediately notify the Company of such dispute and either promptly submit the matter to arbitration or, by interpleader or otherwise, seek a judicial resolution of the dispute.
(6) In lieu of the escrow account required to be established by this section, the Company shall have discretion to accept other financial assurances, including but not limited to a surety bond or irrevocable letter of credit. Any such bond shall be issued by a surety or insurance company authorized to conduct business in Puerto Rico and having a sufficient net worth to be acceptable to the Company. Any such letter of credit shall be issued by a bank, savings and loan association, or other federally insured financial institution authorized to do business in Puerto Rico and having a sufficient net worth to be acceptable to the Company. Such bond or letter of credit shall for an amount which the Company may determine in its judgement to be sufficient to afford to the purchasers under the purchase contracts a reasonable protection against the loss of the refund that may be due to such purchasers pursuant to § 1253(2) of this title.
(7) Any interest generated with respect to the escrowed funds shall inure to the benefit of the party to whom the escrowed funds are paid unless otherwise specified in the applicable purchase contract.
History —Dec. 26, 1995, No. 252, § 3-102; July 5, 1996, No. 66, § 23; Jan. 5, 1999, No. 3, § 28.