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California Condo Contract Cancellation Law
Usually in California, the people who think of investing in the California condos have to put around 1% of the purchase price down in escrow and the rest at closing. However, if due to some reason they decide not to go ahead and close the deal, they will probably lose the escrow money. The exception may occur if the condo has some 'damage' or termite issue hunted down by the home inspector and you are not willing to spend that. All of this of course depends on your original contract.
There are Californian laws protecting buyers of new California condo units. So, for someone who decides to invest around 1% escrow deposit on a $600,000 condo and then due to some cause decides not to finalize the deal, then they lose their $6000 unless their agent can come up with a great reason. However, if you put 15% down, chances are you will get everything back but the 3%.
Usually, as per the law the buyer should inform the seller and the escrow company as soon as possible of his intention, and make a properly formatted demand for most of his deposit back. This is the point when the clock starts ticking for the developer. If the developer follows the proper legal procedure and proves that the buyer’s default is more than 3% he might be able to keep more than the standard 3%, but for that the developer has to first send the defaulting buyer certain financial documents showing why it is entitled to more than 3%. The deadline to do all this procedure for the developer is quite limited.
A wise condo buyer along with the help of a good lawyer will then review these documents and if feels that the developer is trying to keep more of the deposit, can challenge the documents if necessary. He can then file a response disputing the developer’s calculations if there are any flaws or questionable assumptions. The California condos buyers’ lawyer can also demand through the court the developers’ internal financial data to dispute to verify the developer’s information, as well as file subpoenas demanding employees of the developer submit to depositions.
The California condos buyer gets in a strong position if the developer does not file any documents on time in the court, and then as soon as the deadlines expire he can file suit against the developer for the deposit refund. You’d surprise the developer when they fail to properly respond to a buyer’s demand for a partial refund due to sheer negligence. But again, if you are able to take advantage of the developer’s mistakes, you will need a lawyer who is good and capable to recognize their mistake and jump all over them at the right time. Being represented by counsel puts you in a stronger position while negotiating a settlement with the developer, sometimes before even filing suit. Getting you most of the deposit refund you’re entitled to, in an outside court settlement, can also save the Californian condos buyer a week’s trouble. If you want to read more, Gweston's blog on wordpress has some excellent resources about condo laws.
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