Florida Statute 718.202 escrows only the first 10 percent of a Miami pre-construction deposit, and permits everything above that to fund construction once building has begun. My read, after two South Florida projects landed in lender disputes this August, is that your contract decides your exposure, not the market. Read the bold legend on page one before you wire.
Two South Florida condominium projects landed in lender disputes in the same week this August. In Boca Raton, the developer of a stalled 88-unit tower went to court to stop a UCC auction of the site. In Coral Gables, a developer with a pipeline running from Hialeah to North Bay Village was hit with four lawsuits alleging defaults on preferred equity and loans. Neither story is about prices. Both turn on a question every pre-construction buyer should ask before wiring anything: where does my deposit actually sit, and who is allowed to spend it?
Only Your First 10 Percent Sits in Protected Escrow
Most buyers assume a deposit is money parked somewhere neutral until the building is finished. Florida law is more specific, and the specifics are where the risk lives. Under Florida Statute 718.202, a developer selling a unit that is not substantially complete must place all payments up to 10 percent of the sale price into escrow with an independent agent.
Everything above that first 10 percent goes into a separate special escrow account. Here is the part that surprises people: section 718.202(3) lets the developer withdraw those excess funds once construction has begun, if the contract permits it. The money can then pay actual construction costs, defined to include demolition, site clearing, permit fees, impact fees, utility reservation fees and architectural, engineering and surveying work.
The statute also fences off what that money cannot touch: sales commissions, advertising, marketing, loan fees, loan interest, attorney fees, accounting fees or insurance. A contract permitting this use must say so in boldface on the first page, immediately above your signature. That legend is the disclosure telling you how much of your money stays recoverable.
Where Each Slice of a Deposit Actually Sits
The table below is my own breakdown of a typical Miami pre-construction deposit schedule mapped against what Florida Statute 718.202 protects at each stage. Developers structure schedules differently, so treat the tiers as the common shape rather than a universal one. The point is the pattern: protection does not scale with the size of your deposit.
| Deposit stage | Held in protected escrow? | Governing provision |
|---|---|---|
| Reservation deposit, before a contract exists | Yes, refundable in full on written request | 718.202(6) |
| First 10 percent of the purchase price | Yes, escrowed or bonded | 718.202(1) |
| Balance of a 20 percent contract deposit | Only until construction starts | 718.202(2) and (3) |
| Groundbreaking and milestone installments | Releasable to construction costs | 718.202(3) |
| Can released funds pay marketing or commissions? | No, expressly prohibited | 718.202(3) |
| Must the escrow agent be independent of the developer? | Yes, always | 718.202(8) |
| Remedy if no escrow account was ever created | Contract voidable, refund with interest | 718.202(5) and (7) |
Read the middle rows carefully. A buyer who has paid 40 percent into a tower under construction does not have four times the protection of a buyer who has paid 10 percent. They have the same 10 percent protected, and a much larger unsecured position. That asymmetry is the whole subject of this article.
Two August 2026 Cases, Two Different Kinds of Trouble
Distress does not usually announce itself as a failed building. It arrives as a financing dispute, and this month gave South Florida two clear examples.
The first is the Mandarin Oriental Boca Raton, an 88-unit condominium at 105 East Camino Real that has been tied up in lawsuits and delays for years. Affiliates of the lender moved to foreclose earlier this summer and a UCC auction was scheduled for the week of August 17. The developer's attorneys convinced a New York judge to halt that sale, and a new hearing was set for October 1, according to The Real Deal. The developer is seeking more than $500 million in damages and alleges the lender manufactured the defaults it is now foreclosing on. Whoever is right, the buyers in those 88 units have been in limbo through every round of it.
The second is different in kind. A Coral Gables developer was hit with four lawsuits in one week alleging defaults on $2.2 million in preferred equity due in May, plus more than $3.4 million in overdue loans, per The Real Deal. The firm cited timing and liquidity challenges and said it expects to settle out of court. Its pipeline includes a planned condo tower of more than 140 units in North Bay Village. The same developer also secured a $100 million construction loan for a different Coral Gables project in June. Trouble in one entity does not mean trouble in all of them, which is exactly why a buyer has to look at the entity on their own contract.
The Distress Is in the Capital Stack, Not the Resale Market
It would be easy to read those two stories as the leading edge of a Miami downturn. The resale data says otherwise.
Only 0.2% of all closed residential sales in Miami last month were distressed, counting both bank-owned properties and short sales, according to July 2026 statistics from MIAMI REALTORS. Total Miami-Dade home sales rose 8.6% year over year to 1,935 transactions, the eleventh consecutive monthly increase, and existing condo sales were up 11.4%. That is not a market in default.
The softness that does exist is a supply story, not a solvency story. Miami condos sit at a 12-month supply, firmly a buyer's market, while single-family runs at 4.8 months, and the median condo price slipped 1.48% year over year to $400,000. Condo inventory has now declined for six straight months. A buyer's market means leverage on price and terms. It does not mean owners are being forced out.
"The distress this year is showing up in the capital stack, not in the MLS. Lenders and equity partners are fighting each other while the resale market keeps clearing. That is why I underwrite the developer's balance sheet on a pre-construction deal and the association's balance sheet on a resale. They are two different risks." Gerardo Gonzalez, Luxury Dade Group at Compass
What I Check Before a Client Wires a Deposit
These two cases have not changed my advice, but they make it easier to explain why the advice exists. The contract is the product. A tower can be beautiful, well located and fully permitted, and still leave you holding an unsecured claim if the sponsor entity runs out of runway mid-build. I read the escrow provisions before the floor plans, and I tell clients to do the same. Our guide to pre-construction deposit default covers the mirror-image case, where the buyer cannot close.
The checks that actually change the outcome:
- Read the boldface legend on page one of the contract. If it is there, your deposit above 10 percent can be spent on construction. If it is absent, those funds must stay in the special account until closing.
- Identify the escrow agent by name and confirm it qualifies under 718.202(8), and that it is independent of the developer. Ask for the escrow agreement, not just the agent's name.
- Ask which legal entity is the seller on your contract, then look at that entity specifically. A developer's other projects can be healthy while yours is not, and the reverse is equally true.
- Ask who the construction lender is and whether the loan has closed. A project selling hard before a construction loan closes is selling against a financing risk you are helping to underwrite.
- Negotiate the deposit schedule, not just the price. Weighting more of your money past the 10 percent line toward later milestones keeps a larger share recoverable for longer.
- Track construction against the announced timeline. A stall is the earliest visible symptom of a capital problem, and it usually shows up long before a lawsuit does. Our developer due diligence guide walks through the public records to check.
- Compare the schedule you are offered against the market norm in the 2026 deposit schedule report before you agree to anything above 20 percent at contract.
- If the project does stall, get a Florida real estate attorney early. The statutory remedies in 718.202(5) are real, but they run on the contract's language and on deadlines.
One thing worth saying plainly, because two lawsuits in one week reads worse than it is: a lender dispute is not a failed building. Both cases are contested and unresolved. Treat them as reminders to read your own contract, not as a forecast.
Miami pre-construction still works the way it always has, and the protection was never as broad as buyers assume. Ten percent is escrowed. The rest depends on what you signed. For the full sequence from reservation to closing, start with the pre-construction buying process guide, and the Delmore Surfside pricing lesson shows what weak absorption looks like early. Questions on a specific building or contract, call me at (305) 964-8614 or use the contact page.
About to Wire a Pre-Construction Deposit? Send Me the Contract First
Tell me which project you are looking at and I will walk you through the escrow provisions, who the seller entity actually is, where the construction financing stands, and how much of your deposit stays recoverable at each milestone.
Request a Contract ReviewPrefer to talk? Call me at (305) 964-8614 or WhatsApp.
Frequently Asked Questions
How much of a Miami pre-construction deposit is actually protected in escrow?
Florida Statute 718.202 requires the developer to place all payments up to 10 percent of the sale price into an escrow account. Payments above that first 10 percent go into a separate special escrow account, but the contract can authorize their release to the developer once construction has begun.
Can a Miami developer legally spend my deposit before the condo is finished?
Above the first 10 percent, yes, if the contract permits it and construction has started. Florida Statute 718.202(3) allows those funds to cover actual construction costs such as demolition, permit fees, impact fees and engineering. It bars their use for salaries, commissions, advertising, loan interest, attorney fees or insurance.
What happens to my deposit if the developer's lender forecloses on the project?
Escrowed funds remain with the independent escrow agent and are governed by the contract's release terms rather than by the lender's claim. Money already released to the developer for construction costs becomes a claim against that entity. That is why the escrowed portion and the released portion carry very different risk.
Who is legally allowed to hold a pre-construction deposit in Florida?
Under Florida Statute 718.202(8) the escrow agent must be a bank, a savings and loan association, an attorney who is a member of The Florida Bar, a registered real estate broker, an authorized title insurer, or a lending institution with a net worth above $5 million. The agent must be independent of the developer.
What can a buyer do if the developer never established an escrow account?
Failure to comply with Florida Statute 718.202 renders the contract voidable by the buyer, and all sums deposited must be refunded with interest. A willful failure to escrow is a third-degree felony, and the statute treats a missing escrow account as prima facie evidence of an intentional violation.
