§514E-25 Lien payment deposit. (a) The lien payment deposit shall consist of either:

(1) Nondelinquent purchase money contracts from purchasers of time share interests in the time share plan; or

(2) Other assets deposited into trust by the developer and approved by the director.

(b)(1) The purchase money contracts shall have an aggregate remaining principal balance of not less than, and any other assets deposited shall have a liquidated value of not less than, one hundred ten per cent of the difference between:

(A) The aggregate remaining principal balance owing under blanket liens against the time share unit or time share interests in it, including any prepayment penalties, release prices, and similar charges; and

(B) The amount of money, or its equivalent, in the trust and available at any time to be applied to the reduction of the principal balance of the blanket lien.

The developer shall have the burden of establishing, to the satisfaction of the director, the liquidated value of assets other than purchase money contracts from purchasers in the time share plan.

(2) If the blanket lien payment deposit consists of purchase money contracts, the payments required to be made by purchasers under the contracts shall:

(A) Be due on or before the dates on which payments become due on the blanket liens;

(B) If paid when due, be equal to at least one hundred ten per cent of the amount required to be paid on the blanket liens on that date; and

(C) Be sufficient to pay, in full, during the term of those contracts:

(i) All amounts secured by the blanket liens, including prepayment penalties and release prices, if any; and

(ii) All service charges payable to the trustee, any collection agent, and any other servicing agent pursuant to the trust instrument.

(3) If the developer proposes to deposit into trust assets other than purchase money contracts, those assets shall be sufficient to pay debt service installments on the blanket lien as they become due and to create a sinking fund or other arrangement adequate to extinguish the debt secured by the blanket lien at its maturity.

(c)(1) In lieu of the requirements of subsection (b), the developer may elect to follow the requirements of paragraphs (2), (3), (4), and (5) if the following requirements are met:

(A) The developer owns or leases under a lease for a term of not less than thirty years all the noncommercial portions of a hotel, condominium, cooperative, or other project;

(B) No more than seventy-five per cent of the appraised value of the project is subject to a mortgage or other lien. The appraised value shall be based on the use of the project prior to the creation of the time share plan;

(C) As security for the obligations of the developer to the owners:

(i) The developer executes and records a mortgage in favor of the trustee under the lien payment trust or the association, in either case as trustee on behalf of the owners, twenty-five per cent of the appraised value of the project; or

(ii) The developer conveys or transfers the project to a trust meeting the requirements of sections 514E-22 and 514E-23, and under the terms of the trust instrument the twenty-five per cent of the beneficial interest in the trust is held for the benefit of, or conveyed or transferred to, the association, acting as trustee for the owners; and

(D) The developer files a verified statement of the program of financing, acceptable to the director, containing a cash flow analysis showing that the developer has adequate funds to pay the debt service installments on the blanket liens on the project during the sales period and to extinguish the debt secured by the blanket lien at its maturity, whether from sales proceeds, loan commitments, income from operations of the project, or other sources.

(2) The purchase money contracts shall have an aggregate remaining principal balance of not less than, and any other assets deposited shall have a liquidated value of not less than, one hundred ten per cent of the difference between:

(A) A pro rata share of the aggregate remaining principal balance owing under blanket liens against the time share unit or time share interests in it, including any prepayment penalties, release prices, and similar charges; and

(B) A pro rata share of the amount of money, or its equivalent, in the trust and available at any time to be applied to the reduction of the principal balance of the blanket lien.

The developer shall have the burden of establishing, to the satisfaction of the director, the liquidated value of assets other than purchase money contracts from purchasers in the time share plan.

(3) If the blanket lien payment deposit consists of purchase money contracts, the payments required to be made by purchasers under the contracts shall:

(A) Be due on or before the dates on which payments become due on the blanket liens;

(B) If paid when due, be equal to at least one hundred ten per cent of a pro rata share of the amount required to be paid on the blanket liens on that date; and

(C) Be sufficient to pay, in full, during the term of those contracts:

(i) A pro rata share of all amounts secured by the blanket liens, including prepayment penalties and release prices, if any; and

(ii) All service charges payable to the trustee, any collection agent, and any other servicing agent pursuant to the trust instrument.

(4) If the developer proposes to deposit into trust assets other than purchase money contracts, those assets shall be sufficient to pay a pro rata share of the debt service installments on the blanket lien as they become due and to create a sinking fund or other arrangement adequate to extinguish the debt secured by the blanket lien at its maturity.

(5) For purposes of this subsection, the term "pro rata share" means a share proportionate to the ratio that the number of time share units in which the sale of time share interests have been closed bears to the total number of time share units in the project. No more than fifty-one weeks of use annually may be attributed to each time share unit in determining the pro rata share.

(6) The developer may elect to terminate the use of the provisions of this subsection upon satisfying all of the requirements of either subsection (b) or section 514E-26(c).

(d) For purposes of this section, a purchase money contract is deemed delinquent when an installment payment is more than fifty-nine days past due. [L 1982, c 186, §13; am L 2018, c 18, §35]