2009 California Civil Code - Section 1675-1681 :: Chapter 2. Default On Real Property Purchase Contract

CIVIL CODE
SECTION 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, 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 the 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, "structure" means 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, "new qualified buyer" means a
buyer who either:
   (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.
   (g) (1) (A) Notwithstanding subdivision (c), (d), or (f), for the
initial sale of newly constructed attached condominium units, as
defined pursuant to Section 783, that involves the sale of an
attached residential condominium unit described in subparagraph (B),
and the amount actually paid to the seller pursuant to the liquidated
damages provision exceeds 6 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:
   (i) 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.
   (ii) 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 the 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 6 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.
   (B) This subdivision applies to an attached residential
condominium unit for which both of the following are true:
   (i) The unit is located within a structure of 20 or more
residential condominium units, standing over eight stories high, that
is high-density infill development, as defined in paragraph (10) of
subdivision (a) of Section 21159.24 of the Public Resources Code, and
that is located in a city, county, or city and county with a
population density of 1,900 residents per square mile or greater, as
evidenced by the 2000 United States census.
   (ii) The purchase price of the unit was more than one million
dollars ($1,000,000).
   (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 6 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, "structure" means 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, "new qualified buyer" means a
buyer who either:
   (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.
   (8) Commencing on July 1, 2010, and annually on each July 1
thereafter, the dollar amount of the minimum purchase price specified
in paragraph (1) shall be adjusted. The Real Estate Commissioner
shall determine the amount of the adjustment based on the change in
the median price of a single family home in California, as determined
by the most recent data available from the Federal Housing Finance
Board. Upon determining the amount of the adjustment, the Real Estate
Commissioner shall publish the current dollar amount of the minimum
purchase price on the Internet Web site of the Department of Real
Estate.
   (9) Prior to the execution of a contract for sale of a residential
condominium unit subject to this subdivision, the seller shall
provide to the buyer the following notice, in at least 12-point type:

   "Important Notice Regarding Your Deposit: Under California law, in
a contract for the initial sale of a newly constructed attached
condominium unit in a building over eight stories tall, containing 20
or more residential units, and located in a high-density infill
development in a city, county, or city and county with 1,900
residents or more per square mile, where the price is more than one
million dollars ($1,000,000), as adjusted by the Department of Real
Estate, liquidated damages of 6 percent of the purchase price are
presumed valid if the buyer defaults, unless the buyer establishes
that the amount is unreasonable."

   If the seller fails to provide this notice to the buyer prior to
the execution of the contract, the amount of any liquidated damages
shall be subject to subdivisions (c) and (d).
   (h) This section shall become inoperative on July 1, 2014, and, as
of January 1, 2015, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2015, deletes or
extends the dates on which it becomes inoperative and is repealed.

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, 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 the 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, "structure" means 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, "new qualified buyer" means a
buyer who either:
   (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.
   (g) This section shall become operative on July 1, 2014.

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.


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