AI Arguments For And Against SB 26

This is a production of Citizen in a Republic, which covers New Hampshire legislative politics.

Below is a summary of SB 26 (2025 Session), followed by arguments in support of the proposed changes and arguments against them. At the end, you will also see some references to existing law that may bear on these arguments.

Overview of SB 26

What the bill does
SB 26 proposes adding a new definition of the term “deposits” in two places:

  1. RSA 356-A (Land Sales Full Disclosure Act):

    • Inserts a new Paragraph XVIII in RSA 356-A:1.
    • Defines “deposits” as the earnest money for a purchase and sales agreement in any disposition of real estate (lot, parcel, unit, etc.), excluding change orders, upgrades, or additional funds due to buyer selections.

  2. RSA 356-B (Condominium Act):

    • Inserts a new Paragraph XIII-a in RSA 356-B:3.
    • Similarly defines “deposits” as the earnest money for a purchase and sales agreement relating to real estate, excluding change orders, upgrades, or other additional buyer-selected funds.

Key Points in the Bill

  • Declares that “deposit” (or “earnest money”) does not include any funds beyond the standard deposit for the initial purchase.
  • Makes it clear that money paid by a buyer for optional features (e.g., upgraded countertops, extra garage space, special finishes) is not treated as the standard “deposit” for purposes of escrow or other statutory safeguards.

Arguments For SB 26

  1. Clarity for Buyers and Sellers

    • By defining “deposit” (sometimes called “earnest money”) in the Land Sales Full Disclosure Act and Condominium Act, the bill gives clarity as to what is covered by deposit-related protections. This alleviates confusion about what must be held in escrow or subject to statutory rules.
    • Prevents buyers and sellers from inadvertently mixing funds meant for enhancements or change orders with the earnest money deposit, which has special meaning in consumer-protection statutes.

  2. Enhanced Consumer Protection

    • The new definition helps ensure the earnest money for a real estate purchase is adequately protected. It prevents the inadvertent or improper use of that earnest money for construction or upgrades before closing.
    • By excluding upgrades/change orders from the legal category of “deposit,” the buyer cannot accidentally waive the protections the law confers on an earnest money deposit. A buyer’s optional selection (like customizing a kitchen or choosing upgraded flooring) would follow a separate funding path, rather than being lumped into the deposit that is normally refundable in some circumstances.

  3. Consistent Application in Two Relevant Statutes

    • Having the definition included in both RSA 356-A and RSA 356-B harmonizes usage across (a) subdivided land sales under the Land Sales Full Disclosure Act, and (b) condominium sales under the Condominium Act. This consistent approach can help developers, brokers, and buyers avoid inconsistencies or misunderstandings about escrow and refunds.

  4. Reduces Litigation / Disputes

    • Many disputes arise over whether “extra money” a buyer provided is part of the deposit (subject to statutory escrow requirements) or part of the purchase price for optional items. A clear statutory definition may reduce such disputes and, if disputes do arise, provide a clear reference for courts.

  5. Greater Transparency for Lenders

    • Lenders often want to see that any deposit is protected and that any additional funds for upgrades do not jeopardize the buyer’s ability to close on the primary transaction. Having a line drawn between the deposit and any other upgrade payments simplifies both underwriting and closings.

Arguments Against SB 26

  1. Complexity in Real Estate Transactions

    • Creating a separate legal category for “deposits” (earnest money) vs. “upgrade funds” could add procedural steps: developers or brokers may need to maintain two different escrow accounts or two sets of rules, which some might find burdensome.
    • In practice, a buyer and builder often have a single contract or invoice summarizing all amounts due. Splitting out “earnest money” vs. “optional items” might introduce confusion or necessitate extra paperwork.

  2. Potential Increase in Upfront Costs

    • Because SB 26 clarifies that upgrade/change-order money is not part of the deposit, developers or sellers might require a higher deposit up front in some cases to ensure they have sufficient buyer commitment. This could be perceived as shifting more immediate cost to buyers.

  3. Lack of Uniformity With Some Private Arrangements

    • In certain custom home-build or custom condo situations, the parties might prefer to treat all funds (initial deposit + upgrade payments) under a single “escrow deposit” for simplicity or broader refundability. This bill’s language, by drawing a line between standard deposit and upgrade funds, could be perceived as restricting contractual freedom.

  4. Enforcement Ambiguities

    • Although SB 26 clarifies what the deposit includes, critics could argue the bill does not detail how upgrade/change-order funds must be handled, or whether they must be escrowed separately or remain unprotected. Some fear that unscrupulous sellers might use confusion over “these upgrade funds are excluded from the deposit” to avoid returning them in the event of a canceled transaction, if the contract is not otherwise clear.

  5. Possibility of Unintended “Loopholes”

    • By removing special protections from change orders, unscrupulous developers could label more buyer payments as “upgrades” or “extras,” thereby circumventing deposit protections. Critics may argue that a bright line definition encourages re-characterizing amounts that really belong in escrow.

Existing Statutes Potentially Affected or Referenced

  1. RSA 356-A:9-a (“Escrow of Deposits”)

    • Requires that any deposit in a land sales context “shall be held in escrow until settlement or closing.” If “deposit” is newly limited to earnest money, some amounts currently treated as deposit might not be protected in escrow if they are re-labeled as buyer upgrades.

  2. RSA 356-B:57 (“Escrow of Deposits”)

    • Similar escrow requirement under the Condominium Act. If only “earnest money” is escrowed, but not upgrade/change-order funds, buyers will need to be vigilant about how and when they pay for optional items.

  3. RSA 356-B:58 (“Resale by Purchaser”)

    • The newly defined “deposit” concept may not directly change resale procedures, but any references to deposit could now be narrower in scope.

  4. RSA 331-A (Real Estate Practice Act)

    • Real estate brokers have trust account requirements for “escrowed” deposits. Under SB 26, only the earnest money deposit (and not, say, the extra $5,000 for an upgraded deck) would need to go into the broker’s trust account.

Conclusion

SB 26 seeks to provide a clear, narrower definition of “deposit” (earnest money) in land and condo sales, carving out any additional money for buyer-selected upgrades or features. Advocates say this protects earnest money in escrow and clarifies the law; critics worry it may create more administrative burdens and opportunities for confusion or mislabeling. Policymakers will weigh the benefit of consistency and clarity against the risk of added complexity and the potential for circumventing current protections by renaming portions of purchase payments.