Legal Question in Real Estate Law in California
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
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.
The only three (3) day period that I know of is triggered by disclosures required to be given by law.
California law creates a requirement for all sellers of one-to-four residential units (including lease options), unless exempt, to deliver to a buyer two mandated forms: a Transfer Disclosure Statement (TDS) and a Natural Hazards Disclosure (NHD) Statement, created by the Legislature.
If not previously delivered to the buyer, the TDS, NHD and Lead-Based Paint Disclosures and pamphlet (lead disclosures) and other disclosures must be given after acceptance within the number of days specified in paragraph 14 of the purchase and sale agreement. Delivery of the TDS, NHD or lead or other disclosures after the buyer has signed the Purchase Agreement triggers a cancellation period of three (3) days from personal receipt or five (5) days if delivery is by mail. If the buyer receives the TDS, NHD or lead disclosures before signing the Purchase Agreement, there is no cancellation period.
C.A.R. Form CC may be used to both cancel and release deposit. But it is not clear whether you are cancelling for the disclosure reasons that I have set forth, or some other reason.
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