Legal Question in Real Estate Law in California
Dear George - thank you for your latest response. You mentioned that we cannot just exit the contract without reason and that buyer's remorse is not a justifiable reason for wanting to exit the transaction. A fact that I had not mentioned is that we do in fact have a reason. Prior to signing the contract, we hired a surveyor and received a survey of the lot. We noticed that the neighbor's wall had been incorrectly built a couple of feet onto the lot we were buying. The surveyor and a civil engineer confirmed it. The city said the neighbor could be compelled to move the wall. We brought this to the Seller's attention and told him we would NOT purchase the lot until he contacted the own of the neighboring lot and received her permission to allow us (at our expense) to relocate the wall to the side property line. We said that if he could give us verbal confirmation that he spoke with her and that she was OK with it, we would submit the contract. The Seller then sent us a note saying he DID speak with the owner (and mentioned her name) and that she AGREED to let us move the wall. We asked him to ask her for a letter stating such. He wrote back saying we would have the letter in 5 days. But he wanted us to enter the contract in the meantime. We believed him and submitted the contract. However, we added an Addendum to the contract (signed by both parties) REQUIRING this letter from the neighbor, otherwise we would be allowed to EXIT the contact AND the Seller would return any deposited funds to us. Several days after the contract was agreed to, we STILL had no received the letter - the 5 days promised had come and gone. We tried to get hold of the Seller, but he had conveniently left town for several days and could not be contacted. We needed to know what was going on, so we contacted the owner of the neighboring lot directly, since he had given us her name, and she said SHE HAD NOT GIVEN HER BLESSING AND DID NOT PROMISE TO GIVE US A LETTER! She then had her attorney call us and he CONFIRMED the same thing. So the Seller LIED to us to get us to enter the contract. He had us enter the contract under false pretenses. It's all in writing. In fact, he ADMITTED in a letter to us a few days ago that the neighbor had not in fact given her permission and had actually REFUSED to write a letter. Our Addendum specifically states that the contract is contingent on the letter and can be cancelled without it. So based on these facts (which are fully documented), would you agree that we aren't simply exiting the contract due to "buyer's remorse" and that we have a justifiable reason for exiting? If so, don't you also believe the Seller (who by the way is a REAL ESTATE AGENT) should sign the cancellation form since he in fact has breached the contract? Let me know what you think. Thanks so much! :-)
Thank you for the additional information, but it does not change my opinion.
VLPA paragraph #19, page 6, states: "TIME PERIODS...CANCELLATION RIGHTS: ...Any cancellation under this paragraph ... must be exercised in good faith..." Buyer's remorse is not an exercise of good faith; yo can not cancel without it being a breach unless there is a valid reason. Any reason is not sufficient. If it were, then there would be no binding contract until the 17 days had passed. An agreement which provides that one party can withdraw for any reason at all is not a binding contract. Even if you had the 17 days, paragraph #34, page 9, is in conflict with your reasoning and being a specific discussion of time limits as opposed to the more general discussion of paragraph #19 which precedes it, overrules the 17 day period.
Real estate agents telling you that you are not in breach of the contract demonstrate why people involved in real estate transactions should not rely upon the real estate industry. They and title insurance agents often do not know the law. Luckily for you, the seller apparently also does not fully know the law.
I will continue later with the rest of my answer.
George Shers
Law Offices of Georges H. Shers
4170 Glenwood Terrace, Suite #1
Union City, CA 94587
3 Answers from Attorneys
I haven't followed your exchanges with Mr. Shers, it seems pretty clear that you have a right to cancel the contract in the situation you describe. If it was a sellers condition, which is rare but in this situation does seem to exist, and he failed to perform, you have a right to cancel. You don't need the seller to sign the cancellation if you are using standard CAR forms, but you do need to give a Notice to Perform first. Once you have given the Notice to Perform form, and they refuse or fail to perform, you may unilaterally cancel by using the Cancellation of Contract, Release of Deposit, and Joint Escrow Instructions form, CAR form CC. The cancellation in part 1. of the form is still valid regardless of whether the seller agrees. Part 2 regarding release of deposit can be left blank and the cancellation is still effective. You then can negotiate or if that fails litigate over release of any deposit and any other damages you may claim.
In addition to the unmet contingency (the letter from the neighbor), I believe the seller may be unable to deliver marketable title because of the substantial encroachment.
The three of us are in complete agreement, based upon this last set of facts, that you are free of any contractual obligations or duties to the seller. You made a contract dependent upon the happening of a subsequent event -- the agreement to allow the wall to be moved -- which the seller failed to comply with. So there is no binding contract. The seller is also liable for misrepresentation and should be reported to the Department of Real Estate for fraud, possibly extortion, etc. You should send him a letter demanding that he drop all claims you have any obligations to him and that he immediately agree to the cancellation of the alleged purchase agreement.
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