What Is the Rule for Construction Deposits?

Construction deposit rules vary by industry. The mortgage, construction and utilities industries all establish procedures, policies and agreements for depositing funds into financial accounts. Each industry’s construction deposits rule requires the buyer and the seller to make reasonable estimates regarding damages.

Line Extensions

Utility companies require construction deposits from new customers who need line extensions. Companies request a construction deposit from any customer who needs service. Customers must comply with construction deposit rules regarding line extension requests.

New Home Purchase

Standard new home purchase and sale agreements outline the provisions for handling construction deposits. The agreement is typically between the buyer and seller of real estate property. To protect the seller against risk of loss related to failure to close on the property, the seller requires the buyer to pay a nonrefundable construction deposit.

State Construction Laws

Construction deposit rules outline the procedures for depositing, withdrawing and submitting notices under state construction lien laws. Courts deposit checks into interest-bearing accounts in designated depositories.

Public Works

Cities and county districts may enter into agreements with land developers for the purpose of constructing facilities. Rules for construction deposits outline the provisions of the project agreement by establishing guidelines for the timing of the contract, estimate of the construction deposit and reimbursement for overpayment.