For a total list of all the real-estate laws digested by first tuesday for the 2008 legislative session, click here.

Reported by Bradley Markano:

Deposit refund on buyer’s breach on the purchase of new $1,000,000+ condos

Civil Code §1675
Amended by A.B. 2020
Effective: January 1, 2009

Consider a buyer who defaults on an agreement to purchase a condominium unit for a price of over $1,000,000. The structure which contains the condominium unit:

  • is at least 8 stories high;
  • includes a minimum of 20 residential condominium units;
  • is a high-density infill development; and
  • is located in a city or county with a population density of at least 1,900 residents per square mile.

In this situation, if the purchase agreement contains a liquidated damages provision, the defaulting buyer is entitled to a refund of his good faith deposit for any money losses greater than:

  • 6% of the originally agreed-upon purchase price of the unit;
  • the total amount of losses suffered by the builder/seller due to the buyer’s default; or
  • any amount the buyer establishes as reasonable according to state law.

The seller is required to make a reasonable effort to mitigate any costs which arise from the buyer’s default.

The seller is to hand the defaulting buyer an accounting of all costs and revenues within 60 days after closing escrow on the sale or lease of the unit or entering into a purchase contract with a replacement buyer who:

  • has a loan commitment from an institutional lender for an amount equal to the purchase price, less any downpayment already deposited by the replacement buyer; or
  • has agreed to a purchase price equal to or greater than the price the defaulting buyer had agreed to pay.

Before entering into a purchase agreement with the replacement buyer for resale of such a unit, the seller is to provide the defaulting buyer with the following notice in at least 12-point type:

“Important Notice Regarding Your Deposit: Under California law, in a contract for the initial sale of a newly constructed attached condominium unit in a building over eight stories tall, containing 20 or more residential units, and located in a high-density infill development in a city, county, or city and county with 1,900 residents or more per square mile, where the price is more than $1,000,000, as adjusted by the California Department of Real estate (DRE), liquidated damages of 6 percent of the purchase price are presumed valid if the buyer defaults, unless the buyer establishes that the amount is unreasonable.”

If the seller does not provide this notice to the buyer before entering into a purchase agreement, the amount of liquidated damages kept by the seller will be limited to 3% of the purchase price of the unit, unless the seller establishes that a greater amount is reasonable.

On July 1 of every year the Department of Real Estate will publish the adjusted minimum purchase price controlling these sales based on the Federal Housing Finance Board’s determination of the median price of single family homes in California.

For more information on liquidated damages, see “The buyer’s deposit and liquidated damages” from the June 2007 issue.

Civil Codes §§ 1980.5 and 1993.01
Amended by A.B. 2025
Effective: January 1, 2009

Disposition of personal property by nonresidential tenants and landlords

The disposal of personal property remaining after the termination of tenancy on nonresidential property is now subject to different rules from those controlling disposal of personal property on residential property and self-storage units.

The following rules apply to both residential and nonresidential properties:

  • If a landlord or his manager takes possession of personal property believed to have been lost, the property must be returned to its owner, conditioned only upon reasonable charges for costs of storage. If the owner is unknown, the landlord or manager must turn the property over to the local police department;
  • Personal property described in a notice of personal property remaining on the premises is to be released by the landlord to the former tenant or owner of the personal property, so long as they pay a reasonable cost of storage and take possession of the property by the date required in the notice. If the property is not claimed by the required date, and the notice states that the unclaimed property will be sold at a public sale, the landlord must still release the property to the former tenant if he claims it prior to the time of the sale and pays the reasonable costs of storage, advertising, and sale;
  • If a former tenant claims abandoned property, he may be required to pay the cost of storage for all property remaining on the premises which has not yet been paid;
  • If anybody other than a former tenant claims property, he may only be required to pay the reasonable costs of storage for the property he claims;
  • No more than one person reclaiming abandoned property may be charged by the landlord for the same costs; and,
  • If the landlord stores the property on the premises, the cost of storage will be the fair rental value of the space reasonably required for the storage.

Civil Code §1993.03
Amended by A.B. 2025
Effective: January 1, 2009

Notice given prior to disposing of personal property on nonresidential property

If personal property remains after a nonresidential tenant vacates the premises, the landlord is to give written notice to the nonresidential tenant, and any other person reasonably believed to be the owner of the property. This notice must include a complete description of the property and state:

  • the charge for costs of storage;
  • the location for claiming the property; and
  • the date by which the property must be claimed. This date must be more than fifteen days after the notice is personally delivered, or more than 18 days after the notice is deposited in the mail.

The notice is to be personally delivered or sent by first class mail, postage prepaid, to the last known address of the person to be notified. If sent by mail, one copy is to be sent to the vacated premises.

[See first tuesday Forms 583, 583-1]

Civil Code §1993.04
Amended by A.B. 2025
Effective: January 1, 2009

Notice to a former nonresidential tenant before disposing of personal property

The notice to a former nonresidential tenant of personal property remaining on the vacated premises is to contain wording as set out in first tuesday Form 583.

Civil Code §1993.05
Amended by A.B. 2025
Effective: January 1, 2009

Notice to parties other than nonresidential tenant prior to disposing of personal property

The notice to individuals other than the tenant of personal property remaining on the vacated premises is to contain wording as set out in first tuesday Form 583-1.

Civil Code §1993.06
Amended by A.B. 2025
Effective: January 1, 2009

Nonresidential landlord’s duty to keep abandoned property

A nonresidential landlord is required to leave abandoned personal property on the vacated premises or keep it safely until he releases or disposes of it.

Civil Code §1993.07
Amended by A.B. 2025
Effective: January 1, 2009

Sale of abandoned personal property on nonresidential property and disposal of proceeds

Abandoned personal property on nonresidential property that is not released to its owner is to be sold at a public sale. The landlord and the former tenant are both permitted to bid on the property at this sale.

If the landlord reasonably believes that the total resale value of the unreleased property is less than $750 or one dollar per square foot (whichever is less), the landlord may retain the property for his own use or dispose of it in any manner.

Notice of the time and place of the public sale must be placed in a newspaper generally circulated in the county in which the sale is to be held. The last publication of this notice must be more than five days before the sale but after the deadline for the former tenant to reclaim his property. This notice will describe the property extensively enough for the owner to identify it as his.

After deducting the costs of storage, advertising, and sale, any balance of the sale’s proceeds not claimed by the property’s former owner is to be paid within 30 days to the county treasury. The former property owner may claim the balance within one year by applying to the county treasurer. If the county pays any part of the balance to a claimant, it will not be liable to any other claimant for that amount.

Civil Code §1993.08
Amended by A.B. 2025
Effective: January 1, 2009

Nonresidential landlord’s non-liability for release or disposal of personal property

A nonresidential landlord who releases abandoned property to a former tenant is not liable to any other individual for that property.

A nonresidential landlord who releases abandoned property to anybody other than the tenant whom the landlord reasonably believes to be the owner of the property, or disposes of the personal property in a public sale, is not liable for that property to:

  • any person to whom notice to reclaim personal property was given as required by Section 1993.03; [See first tuesday Form 583]
  • any other person, unless the landlord failed to send them the required notice.

[See first tuesday Forms 583, 583-1]

Civil Code §1993.09
Amended by A.B. 2025
Effective: January 1, 2009

Combining notice of belief of abandonment and notice of abandoned property

A notice of abandoned personal property may be given to a tenant at the same time as a notice of belief of abandonment of nonresidential property. Notices given simultaneously may be combined into a single notice containing all required information.

[See first tuesday Form 581-1]