Legal Question in Real Estate Law in California
FOLLOW UP QUESTION
Thank you so much for the below answer. I just wanted to give you some addditional facts to see if that changes your impression of the situation:
The California Vacant Land Purchase Agreement has a 17 Day "Buyer Investigation" period that allows buyers to cancel the agreement for "any reason" at all during that period. The contract states that any initial deposit sent to Escrow shall be returned to the buyer if the contract is cancelled within the 17 days, regardless of the reason. We cancelled the contract 3 business days after the acceptance of the contract by both parties - well within the 17 day Buyer Investigation period. Per the terms of the contract, we were NOT actually required to send in the initial deposit to Escrow until 3 BUSINESS DAYS after the acceptance date - this is clearly stated on Page 1 of the contract. Because we CANCELLED the contract BEFORE the "contractual deadline" for sending in the initial deposit, we could not possibly have breached the contract for this reason. We cancelled the contract BEFORE we would have been in breach. We would only have breached the contract if we had NOT sent the initial deposit in by the 3 business day DEADLINE, and then cancelled the contract AFTER that deadline.
Our issue here isn't whether or not we breached the contract - we've had various real estate agents confirm that we cancelled the contract within the right time frame and did absolutely nothing to breach the terms of the contract. What we would like to know is, from a "legal" perspective, why would the Seller be refusing to sign the cancellation form and what could he possibly take us to court for?
Thanks again!
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RESPONSE TO BELOW QUESTION
I assume you mean that you cancelled before he signed the agreement to sell, but you state the opposite. The only three day period I am aware of in the standard CAR purchase Agreement is Paragraph #34, page 9, which states the offer is considered cancelled if the seller does not sign and deliver the acceptance within three days of it being made. The offer is good for three days, not that you have three day to withdraw. Once the seller accepts and returns the acceptance to you within three days, unless there is a provision to the contrary, you are stuck with the contract. With the offer, you are supposed to put up a deposit which is normally deemed forfeited if you fail to go with the purchase. That you failed to deposit that agreed to sum does not mean you are not liable for it. So if you are using the standard CAR contract, the seller has you over a barrel. He can demand you pay the deposit sum to him; he can offer to take something else that you will agree to. Since you have breached the contract, he has the option to declare that it is breached and sue you for damages for your purchase of the property, or he can declare the contract still in effect and collect the liquiated damages.
You need to see a real estate attorney to present the contract and all the facts for them to determine if you are stuck. Do not trust the title Company to know anything about the law, as they often do not.
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ORIGINAL QUESTION
I have an unusual question for you about the cancellation of a vacant land purchase agreement. The contract was mutually signed and then cancelled 3 business days later. We formally cancelled the contract by submitting CAR Form CC (contract cancellation form) to the Escrow Holder and to the Seller (who by the way is also a licensed California real estate agent). We sent the cancellation form by email with a return receipt showing it was received by both parties. Although the Seller is an agent, he went into the transaction as a private party because he wanted to save himself having to pay fees on any commission. So this land purchase was essentially a transaction between 2 private parties. Because we cancelled the contract on the 3rd business day after the contract acceptance date, we had not sent in any deposit and therefore there are no funds in dispute. The problem is that the Seller REFUSES to sign the contract cancellation form UNLESS we give him a survey we paid for which cost us $1750 and an appraisal we paid for which cost us $600. He sent us an email stating that he will not sign the cancellation form until we send these documents to him - which sounds like a thinly veiled attempt to extort us, or at the very least threaten us. Mind you, this person is a licensed California real estate agent!
How does this impact us? According to the Escrow Holder, she will keep the Escrow Account for this contract open "indefinitely" until the Seller signs and delivers the cancellation form. She also said the contract itself is still open until he signs the form. So does this mean he has some hold over us? We understand that he cannot sell his property to anyone else while he is still in the contract with us, but he doesn't seem to care. He seems to care more about trying to punish us, and trying to get us to send him documents he does not have a right to, and did not pay for. Can he at some point come back and take legal action against us as long as this contract is still open?
Also, isn't this behavior unethical? As a licensed California real estate agent, regardless of whether he was acting as one in the transaction or not, doesn't he have a fiduciary duty to follow real estate law and do the right thing? He has absolutely NO GROUNDS to refuse to sign the cancellation form. Yet that's exactly what he's doing. And worse, he is attempting to extort us by saying he refuses to do what he is "supposed" to do unless we give him something of "value" in exchange.
Can we simply walk away from this transaction since there is no money on the line and we formally cancelled within 3 business days?
Thank you!
2 Answers from Attorneys
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.
Further answers to later information seem to pretty well resolve the question, but I'd suggest the questioner and the attorney speak to each other directly, rather than through the forum.
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