Is My Deposit Safe If I Buy a Pre-Construction Condo?

Yes, largely. Florida's Condominium Act forces the developer to escrow your deposit up to 10% of the price. That money can only close your purchase or come back to you. Deposits above 10% may fund construction if your contract permits. The bigger danger is a stalled project, not a stolen deposit.

How Florida Law Protects Your Condo Deposit

Florida gives pre-construction condo buyers real statutory protection through the Condominium Act. Section 718.202 controls how a developer must handle your deposit before closing. An independent escrow agent holds the funds and provides a receipt on request. That structure exists specifically to keep your money out of a developer's operating account.

The protection is strongest on the first portion of your deposit. On the Discover South Florida Podcast, Larry Mastropieri put the core worry in plain terms for buyers across Broward County and beyond.

"The risk is, are they going to run away with my money? Or are they going to go bankrupt and not finish the project, and then I'm stuck?"

The 10% Escrow Rule Explained

Florida law requires the developer to escrow every dollar you pay up to 10% of the purchase price. That escrowed money cannot be touched before closing, aside from funding your purchase or returning to you. A buyer who properly cancels receives that deposit back with interest. This first slice of your money carries the strongest legal shield in the entire transaction.

What Happens to Deposits Above 10%

Payments above the first 10% follow a different and riskier set of rules. The developer must still place them in a special escrow account before closing. Your contract, however, can permit the builder to spend that excess on actual construction once work begins. State law bans using those funds for salaries, commissions, or advertising. A contract that allows this must carry a bold warning right above your signature line.

How Big Is a Pre-Construction Condo Deposit?

A pre-construction deposit is far larger than the 10% you might expect on a resale. Most South Florida developers collect the money in stages tied to construction progress. The total you commit before closing often climbs well past that first protected slice.

The Milestone Deposit Schedule

A typical structure starts with 10% at contract signing, then adds installments as the building rises. A second 10% often lands at groundbreaking, with more due at a construction milestone. Luxury projects can require 40% to 50% of the price before you ever close. Each payment above the first 10% is money the developer may put to work, so your exposure grows with every installment.

What a Reservation Deposit Means for You

A reservation agreement is the lowest-risk way to enter a pre-construction deal. It holds your spot in the building before you sign a binding purchase contract. Florida law treats this early money with extra care.

Your reservation deposit goes into escrow like any other payment. The key difference is that you can get it back in full at any time before signing the purchase agreement. A simple written request to the escrow agent triggers a complete refund. That flexibility makes a reservation a smart first step while you finish your due diligence.

What Is the Real Risk With Pre-Construction?

The genuine danger is rarely a developer stealing your money outright. A reputable builder has far too much to lose by pocketing deposits. The more realistic threat is a project that stalls, drags on for years, or never reaches the finish line. Your escrowed deposit stays protected, yet your money and your plans can sit frozen for a long time.

South Florida condo buyers usually worry about the wrong scenario. Theft is uncommon, while delay is the risk that actually derails people. A ballooning timeline can tie up a large deposit and upend your housing plans across West Palm Beach or Fort Lauderdale.

The Mandarin Oriental Boca Raton Cautionary Tale

One local project shows exactly how a delay can unfold. Penn-Florida announced the Mandarin Oriental condo and hotel in downtown Boca Raton in 2015, with a 2017 target. Nearly nine years later, the condo is only expected to finish in summer 2026. Larry pointed to this exact situation on the podcast.

"We have an example of that, Mandarin Oriental in Boca Raton, where people put big deposits down for wicked nice places, $20 million properties. A lot of them had to hire attorneys to get their deposit back."

The facts back up his account. Eight condo buyers have filed lawsuits seeking their deposits, and the adjacent hotel entity filed for Chapter 11 bankruptcy in December 2025. The 88-unit condo sits under a separate legal entity and stayed out of that filing. You can read our full breakdown in this Mandarin Oriental report.

Larry stressed how unusual this outcome really is.

"The project was supposed to be done in two years when they made their deposit, and five, six, seven years later, we're still sitting here. It's terrible."

Can You Get Your Deposit Back if the Project Fails?

Yes, buyers usually recover their escrowed deposits, though it can take patience and legal help. Florida law returns your funds with interest when you properly terminate under the contract or the statute. A developer who violates the escrow rules can be forced to refund everything you paid. Even the Mandarin Oriental buyers pursued that path successfully.

Larry has watched that process play out for frustrated buyers.

"A lot of these attorneys were able to successfully get their deposits back for their clients, because these companies are not going to steal somebody's money."

Florida adds another safeguard at the very start of the deal. A buyer of a new residential condo from a developer has 15 days to cancel after signing and receiving all the required condominium documents. A real estate attorney can confirm exactly how these rights apply to your specific contract.

How Do You Vet a Developer Before Putting Money Down?

The single best protection is choosing a developer with a proven track record. A recognized, well-capitalized builder rarely leaves buyers stranded. Larry keeps his own due diligence refreshingly simple.

"I feel pretty comfortable with the pre-construction stuff here, assuming it's a national developer or builder in the area. Go with somebody you at least recognize."

He treats that recognition as the core of the homework.

"A reputable builder would probably be the only real research to make yourself feel more comfortable with the process."

Smaller spec-home builders call for a closer look before you commit. Larry described how he sizes up a lesser-known name for his clients.

"Who's the builder? He builds four homes a year? Okay, he's a small guy. I want to talk to his references."

A high-value purchase justifies real investigation into the company behind it. Many of Larry's buyers even hire a professional to vet a builder before wiring a deposit. That extra step turns a leap of faith into an informed decision across Palm Beach County.

Why Reputable Builders Rarely Touch Your Money

A developer's reputation is worth more than any single deposit. The biggest names build project after project and depend on buyer trust to fill them. Larry framed the incentive clearly.

"That's a really bad day for them if they get that reputation. The next project they do, who's going to make that deposit?"

The math simply does not favor a developer stealing from buyers. A firm like Related Group has multiple active projects and a long track record to protect. Established builders treat your escrowed deposit as sacred, since one scandal would poison every future launch across Boca Raton.

How South Florida Pre-Construction Is Changing

The pre-construction market looks different than it did a few years ago. Many developers now sell units closer to completion instead of years ahead of time. Larry noted this shift on the podcast.

"Most of these homes are selling after the product is finished. The pre-construction thing is kind of gone at this point."

A near-finished project carries far less timeline risk for a buyer. You can often see the actual unit before you commit real money. That trend quietly reduces the biggest danger that pre-construction buyers used to face.

Pre-Construction Versus a Finished Condo

Both paths hold real advantages, and the right one depends on your goals. Pre-construction can lock in today's price on a brand-new unit with fresh finishes and a developer warranty. A finished condo removes the timeline risk entirely, since you see and close on the actual home.

The tradeoff comes down to risk against reward. A pre-construction buyer bets on the market and the developer over a multi-year build. A resale buyer pays a known price for a known product and moves in right away. Your budget, your timeline, and your appetite for risk should guide the choice in Delray Beach.

Pre-Construction Condo Deposit Checklist

• Confirm your deposit up to 10% sits in a dedicated escrow account with an independent escrow agent.
• Read whether your contract lets the developer spend funds above 10% on construction before closing.
• Research the developer's track record, active projects, and financial strength before signing anything.
• Request references for any smaller builder, especially on a high-value custom or spec home.
• Use your 15-day cancellation window to review all condominium documents with an attorney.
• Ask your agent to compare the delivery timeline against the developer's history of hitting deadlines.

Put Your Money Down With Eyes Wide Open

Your deposit carries solid protection under Florida law, but the developer behind the tower decides how smoothly your purchase goes. We help South Florida buyers decode the escrow terms, investigate the builder, and judge the timeline before any funds move. Sharp homework up front is what turns a pre-construction gamble into a confident buy. Reach out to The Mastropieri Group, Realtors® at (561) 544-7000 and point us to the project you love, and we will vet it top to bottom before you sign.

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• South Florida FAQ
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