Under what condition may a dealer not establish an escrow account?

A dealer may not establish an escrow account with an escrow company in which they have over 5% ownership because this situation poses a conflict of interest. The purpose of requiring a dealer to avoid establishing an escrow account with any company in which they hold a significant ownership stake is to ensure that the transactions remain impartial and that the interests of the buyers and sellers are protected. If a dealer has a substantial financial interest in the escrow company, it could influence their actions and decision-making during the transaction, leading to potential bias and undermining the integrity of the escrow process.

In California, regulations set these ownership thresholds to prevent dealers from having financial benefits that could compromise their objectivity in handling deposits and funds associated with the sale of mobile homes. This built-in safeguard aims to maintain transparency and fairness in the dealings of mobile home sales.

Options that suggest higher ownership percentages, such as 10% or any ownership scenario leading to a conflict, align with this principle as they imply an increased level of control or influence by the dealer, which could jeopardize customer trust and regulatory compliance.