| California Condo Buyers Who Decide Not to Close | | | | never be followed up on. |
| On Their Units Are Usually Entitled to a Partial | | | | California Condo Contract Cancellation Law People |
| Refund of Their Condo Deposit. A Smart Investor | | | | who purchase condos in California usually put 10% |
| Who Wants to Cancel His Condo Contract Should | | | | to 20% of the purchase price down as a deposit. |
| Hire a Lawyer to Protect His Rights, Guide Him | | | | However, if they decide not to close, in most |
| Through the Process, and Secure a Favorable | | | | circumstances they are entitled to get all but 3% |
| Settlement There was a flurry of litigation | | | | of the purchase price back under California's laws |
| between condo buyers and sellers in 2007, and | | | | protecting buyers of new condo units. So |
| there will much more in 2008. My fellow condo | | | | someone who puts down a $90,000 deposit |
| contract lawyer Jared Beck covered many such | | | | (15%) on a $600,000 condo and then decides not |
| suits filed in Florida over on his blog. | | | | to close is probably entitled to get $72,000 of his |
| Most of the litigation boils down to three types of | | | | $90,000 deposit back, while only losing $18,000 |
| disputes: the developer not opening the building on | | | | (3%) to the developer. |
| time, the developer not building the same building | | | | The buyer must be careful, however, that he |
| that it promised to buyers, and the developer | | | | properly gives notice that he does not intend to |
| illegally keeping an excessive amount of the | | | | close. Usually the buyer should inform the seller |
| deposits in collecting from potential buyers. | | | | and the escrow company as soon as possible of |
| The focus of this post is on this last type. | | | | his intention not to close, and make a properly |
| Increasingly people who have put down large | | | | formatted demand for most of his deposit back. |
| deposits on pre-construction condominium units | | | | At this point the clock starts ticking for the |
| are deciding they do not want to close. These | | | | developer. If the developer follows the proper |
| defaulting purchasers are in most cases entitled to | | | | procedure and proves the buyer's default is more |
| some of their deposit back, but frequently the | | | | than 3% it might be able to keep more than the |
| developer refuses to follow the law. | | | | standard 3%, but the developer must first send |
| Developers have obvious reasons for not | | | | the defaulting buyer certain financial documents |
| following the terms of their own contracts as well | | | | showing why it is entitled to more than 3%. The |
| as state and federal law, all of which usually | | | | deadline for the developer to do this is fairly tight. |
| require a partial refund of a buyer's deposit if the | | | | A smart buyer with a good lawyer will then |
| buyer decides not to close. First, most buyers | | | | review these documents if the developer does |
| don't know their rights, and won't even try to get | | | | try to keep more of the deposit, challenge the |
| the refund they are entitled to. | | | | documents if necessary, and then file a response |
| Second, the developers themselves may not | | | | disputing the developer's calculations if their are |
| even realize that state and federal law usually | | | | any flaws or questionable assumptions. The |
| require them to give partial refunds of deposits to | | | | buyer's lawyer will also demand through the |
| buyers. | | | | litigation discovery process the developer's internal |
| Third, even if the developers do know that they | | | | financial data to dispute/verify the developer's |
| are supposed to give partial deposit refunds, they | | | | information, as well as file subpoenas demanding |
| often simply make the business decision to refuse | | | | employees of the developer submit to depositions. |
| to follow the law until the buyer forces them by | | | | The best case for a buyer is if the developer |
| filing a lawsuit. If only 20% of buyers sue, then | | | | does not file any documents on time, and then |
| the developer has to give 20% of its canceling | | | | right after the deadlines expire file suit against the |
| condo buyers refunds, but keeps the full deposits | | | | developer for the deposit refund. You'd surprised |
| on the other 80%. | | | | at how often a developer will fail to properly |
| Even when buyers do know their rights and | | | | respond to a buyer's demand for a partial refund |
| demand a partial refund, sometimes the | | | | out of sheer negligence. But again, if you are |
| developer simply ignores their letters and phone | | | | going to be able to take advantage of the |
| calls demanding the partial refund. Every major | | | | developer's mistakes, you will need a lawyer who |
| developer has its own army of lawyers, and until | | | | is able to recognize and jump all over them. Being |
| the buyer hires his or her own lawyer, the | | | | represented by counsel also allows you to |
| developer can usually get away with ignoring | | | | negotiate a settlement with the developer from a |
| letters from buyers threatening to sue. The | | | | position of strength, sometimes before even filing |
| developers know from experience that when a | | | | suit, getting you most of the deposit refund |
| buyer threatens to sue but hasn't hired a lawyer, | | | | you're entitled to sometimes in a matter of |
| it is usually an empty and idle threat that will | | | | weeks. |