Buyer Fails to Close Escrow – Liquidated Damages to Seller

Many purchase and sale agreements in California contain liquidated damages provisions.  To avoid uncertainty and litigation if a default occurs in a contract for the sale of real property, the parties to a contract may use a liquidated damages clause to determine the measure of damages in advance.  (Ridgley v. Topa Thrift & Loan Assn. (1998) 17 Cal.4th 970, 977.)  In a contract to purchase and sell residential property, a provision that all or any part of a payment made by the buyer will constitute liquidated damages to the seller on 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 statutory requirements and if the amount actually paid pursuant to the provision does not exceed 3% of the purchase price, unless the buyer establishes that the amount is unreasonable as liquidated damages.  (Civ. Code § 1675(b), (c), referring to Civ. Code §§ 1677, 1678.)

Typically, a liquidated damages provision only comes into play where the buyer refuses to close escrow to complete the purchase of property after the buyer has removed all of the buyer contingencies.  In these scenarios, the seller will try to retain the amount deposited into escrow as the initial purchase deposit as liquidated damages per the terms of the liquidated damages provision provided in the written purchase and sale agreement.

To inquire about a free consultation on your purchase and sale dispute, contact our Los Angeles real estate lawyers at Schorr Law, APC, (310) 954-1877, or by filling in the contact box on the right hand side of this page.



Share Button
Tagged with: , ,
Posted in Escrow, Liquidated Damages, Purchase and Sale

Zachary D. Schorr’s Expert Appearance on the Dr. Phil Show

Zachary D. Schorr’s Expert Appearance on ABC’s Nightline

Contact Schorr Law

Super Lawyers

Zachary Schorr Superlawyers

Zachary D. Schorr has been named to the Southern California Super Lawyers (Rising Stars) list for attorneys in Real Estate for 5 straight years - 2012, 2013, 2014, 2015 and 2016. Each year, no more than 2.5 percent of the lawyers in the state receive this honor. In 2016 he was also included as one of the top 100 lawyers in Southern California in this category. The selection for this respected list is made by the research team at Super Lawyers.

Need Representation?

If you are currently involved in a real estate dispute, either commercial real estate or residential, and are looking for a Real Estate Attorney in Los Angeles with a cost-effective, results oriented approach designed to meet your case's specific needs, contact the attorneys at Schorr Law. Our real estate firm has the specific knowledge and experience necessary to get you the best possible results.

AVVO 10.0

Zachary Schorr Avvo Rating

Avvo Clients’ Choice Award Recipient

Zachary Schorr Avvo Client's Choice Award