Legal Question in Real Estate Law in California

Re: penalty fee reimbersement

Possibly, but there are two major contract-interpretation issues that would probably govern the lending bank's liability. The first is whether your contract with the selling bank, as extended, specifies a penalty, e.g., 1% of the selling price, as a penalty for your failure to perform by the extended deadline, and whether the lending bank was aware of this provision.

The second issue is whether the agreement to lend between you and the lending bank has any provisions that bear upon its possibile liability for funding late. My hunch is that most lending institutions are familiar enough with the possibility of funding delays, whether their fault, or someone else's, or of difficult-to-determine fault, or nobody's fault, that they write lending commitments and other loan documents that are extremely protective of themselves; for example, lenders usually have the right to pull the plug on a lending commitment right up to the last instant before funding, and for the slightest of reasons.

So, the analysis starts with a careful reading of the contracts. This is a contract-law matter, and a court deciding the liability issue would base its decision on the intention of the parties as reflected in the writings. If there is no language expressly on point, the court would try to judge from the general tone or other terms of the contract which party was assuming the risk that due to a delay of the kind that occurred, a party would incur costs, such as this charge.

If the lending bank expressly disclaimed liability for such costs, you'd probably lose. You're also likely to lose if the lending bank had no prior knowledge of the possibility of the penalty, but if such penalties are commonplace in that business they'd probably be deemed to have constructive knowledge or to know that penalties were at least forseeable.

On balance, my hunch is you'll find you don't have a claim because the lending bank will have expressly disclaimed responsibility. Even so, you could have an outside chance of overturning such a disclaimer if the lender both knew of the penalty and it was incurred through their fault and none of you own.

Re: penalty fee reimbersement

It depends upon the contracts.