2007 California Civil Code Chapter 2. Default On Real Property Purchase Contract

CA Codes (civ:1675-1681)

1675.  (a) As used in this section, "residential property" means
real property primarily consisting of a dwelling that meets both of
the following requirements:
   (1) The dwelling contains not more than four residential units.
   (2) At the time the contract to purchase and sell the property is
made, the buyer intends to occupy the dwelling or one of its units as
his or her residence.
   (b) A provision in a contract to purchase and sell residential
property that provides that all or any part of a payment made by the
buyer shall constitute liquidated damages to the seller upon the
buyer's failure to complete the purchase of the property is valid to
the extent that payment in the form of cash or check, including a
postdated check, is actually made if the provision satisfies the
requirements of Sections 1677 and 1678 and either subdivision (c) or
(d) of this section.
   (c) If the amount actually paid pursuant to the liquidated damages
provision does not exceed 3 percent of the purchase price, the
provision is valid to the extent that payment is actually made unless
the buyer establishes that the amount is unreasonable as liquidated
damages.
   (d) If the amount actually paid pursuant to the liquidated damages
provision exceeds 3 percent of the purchase price, the provision is
invalid unless the party seeking to uphold the provision establishes
that the amount actually paid is reasonable as liquidated damages.
   (e) For the purposes of subdivisions (c) and (d), the
reasonableness of an amount actually paid as liquidated damages shall
be determined by taking into account both of the following:
   (1) The circumstances existing at the time the contract was made.

   (2) The price and other terms and circumstances of any subsequent
sale or contract to sell and purchase the same property if the sale
or contract is made within six months of the buyer's default.
   (f) (1) Notwithstanding either subdivision (c) or (d), for the
initial sale of newly constructed attached condominium units, as
defined pursuant to Section 783 of the Civil Code, that involves the
sale of an attached residential condominium unit located within a
structure of 10 or more residential condominium units and the amount
actually paid to the seller pursuant to the liquidated damages
provision exceeds 3 percent of the purchase price of the residential
unit in the transaction both of the following shall occur in the
event of a buyer's default:
   (A) The seller shall perform an accounting of its costs and
revenues related to and fairly allocable to the construction and sale
of the residential unit within 60 calendar days after the final
close of escrow of the sale of the unit within the structure.
   (B) The accounting shall include any and all costs and revenues
related to the construction and sale of the residential property and
any delay caused by buyer's default.  The seller shall make
reasonable efforts to mitigate any damages arising from the default.
The seller shall refund to the buyer any amounts previously retained
as liquidated damages in excess of the greater of either 3 percent
of the originally agreed-upon purchase price of the residential
property or the amount of the seller's losses resulting from the
buyer's default, as calculated by the accounting.
   (2) The refund shall be sent to the buyer's last known address
within 90 days after the final close of escrow of the sale or lease
of all the residential condominium units within the structure.
   (3) If the amount retained by the seller after the accounting does
not exceed 3 percent of the purchase price, the amount is valid
unless the buyer establishes that the amount is unreasonable as
liquidated damages pursuant to subdivision (e).
   (4) Subdivision (d) shall not apply to any dispute regarding the
reasonableness of any amount retained as liquidated damages pursuant
to this subdivision.
   (5) Notwithstanding the time periods regarding the performance of
the accounting set forth in paragraph (1), if a "new qualified buyer"
has entered into a contract to purchase the residential property in
question, the seller shall perform the accounting within 60 calendar
days after a new qualified buyer has entered into a contract to
purchase.
   (6) As used in this subdivision, the term "structure" shall mean
either of the following:
   (A) Improvements constructed on a common foundation.
   (B) Improvements constructed by the same owner that must be
constructed concurrently due to the design characteristics of the
improvements or physical characteristics of the property on which the
improvements are located.
   (7) As used in this subdivision, the term "new qualified buyer"
shall mean a buyer that:
   (A) Has been issued a loan commitment, which satisfies the
purchase agreement loan contingency requirement, by an institutional
lender to obtain a loan for an amount equal to the purchase price
less any downpayment possessed by the buyer.
   (B) Has contracted to pay a purchase price that is greater than or
equal to the purchase price to be paid by the original buyer.




1676.  Except as provided in Section 1675, a provision in a contract
to purchase and sell real property liquidating the damages to the
seller if the buyer fails to complete the purchase of the property is
valid if it satisfies the requirements of Section 1677 and the
requirements of subdivision (b) of Section 1671.



1677.  A provision in a contract to purchase and sell real property
liquidating the damages to the seller if the buyer fails to complete
the purchase of the property is invalid unless:
   (a) The provision is separately signed or initialed by each party
to the contract; and
   (b) If the provision is included in a printed contract, it is set
out either in at least 10-point bold type or in contrasting red print
in at least eight-point bold type.



1678. If more than one payment made by the buyer is to constitute
liquidated damages under Section 1675, the amount of any payment
after the first payment is valid as liquidated damages only if (1)
the total of all such payments satisfies the requirements of Section
1675 and (2) a separate liquidated damages provision satisfying the
requirements of Section 1677 is separately signed or initialed by
each party to the contract for each such subsequent payment.



1679.  This chapter applies only to a provision for liquidated
damages to the seller if the buyer fails to complete the purchase of
real property. The validity of any other provision for liquidated
damages in a contract to purchase and sell real property shall be
determined under Section 1671.



1680.  Nothing in this chapter affects any right a party to a
contract for the purchase and sale of real property may have to
obtain specific performance.


1681.  This chapter does not apply to real property sales contracts
as defined in Section 2985.