Conn. Gen. Stat. § 47-271: Escrow of deposits. Use of deposits for construction of improvements. Distribution of interest.

(a) As used in this section, “actual costs” includes, but is not limited to, expenditures for demolition, site clearing, permit fees, impact fees, architectural, engineering and surveying fees, construction, development and design costs of furnishing and equipping the condominium property, but excluding sale and marketing costs.

(b) Any deposit made in connection with the purchase or reservation of a unit from a person required to deliver a public offering statement pursuant to subsection (c) of section 47-263 shall be placed in escrow and held either in this state or in the state where the unit is located in an account designated solely for that purpose by a licensed title insurance company, an attorney, a licensed real estate broker, an independent bonded escrow company or an institution whose accounts are insured by a governmental agency or instrumentality until (1) delivered to the declarant at closing; (2) delivered to the declarant because of the purchaser's default under a contract to purchase the unit; (3) refunded to the purchaser; or (4) used for the construction of improvements, in accordance with the provisions of subsection (c) of this section.

(c) If the contract for the sale of the condominium unit so provides and the purchaser under the purchase contract represents in the purchase contract that such purchaser is an accredited investor as defined in 17 CFR 230.501 et seq., as amended from time to time, at the time the purchaser enters into the contract, the declarant may withdraw escrow funds in excess of one per cent of the purchase price from the escrow account required under subsection (b) of this section when the construction of improvements has commenced. The declarant may withdraw such funds from the escrow account as described in this section for the actual costs incurred by the declarant after termination of the cancellation period, as set forth in section 47-269, for the construction, development and design of the condominium property in which the unit to be sold is located. No part of such funds may be used for salaries, commissions, expenses, real estate licensees or advertising purposes.

(d) A purchase agreement which permits the use of the earnest money deposit in accordance with the provisions of this section shall include the following legend conspicuously printed or stamped in bold type on the first page of the purchase agreement and immediately above the place for the signature of the purchaser: “ANY PAYMENT IN EXCESS OF ONE (1%) PER CENT TOWARDS THE PURCHASE PRICE MADE TO THE DECLARANT PRIOR TO CLOSING PURSUANT TO THE PURCHASE AGREEMENT MAY BE USED FOR ACTUAL COSTS OF CONSTRUCTION, DEVELOPMENT, AND DESIGN, AS DEFINED IN C.G.S. 47-271.”

(e) If such deposit is made in connection with the purchase or reservation of a unit to be occupied by the purchaser and is placed in an interest-bearing escrow account other than an account established and maintained pursuant to section 51-81c, any interest which accrues thereon from the date of such deposit until its disposition pursuant to subdivision (1), (2), (3) or (4) of subsection (b) of this section shall be distributed as follows: (1) If such deposit is delivered to the declarant at closing or refunded to the purchaser, such interest shall be divided equally between the purchaser and the declarant; and (2) if such deposit is delivered to the declarant because of the purchaser's default under a contract to purchase the unit, such interest shall be paid to the declarant.

(f) Any person who procures the wrongful release of any escrow funds to the declarant or to a third party, with intent to defraud the purchaser, shall be guilty of embezzlement and on conviction shall be punished in the manner provided by law.