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I am trying to sell my condo and I have two issues that I am

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dealing with. I am a...
I am trying to sell my condo and I have two issues that I am dealing with. I am a homeowners in San Jose, California.
1-The buyer who cancelled the contract 2 days after they signed the removal of all the contingencies. They want their deposit back. Can we keep their deposit according to the real estate law?
2-When we put our condo on the market, the board members of the HOA wanted to do an inspection last week and they said that I have to remove a wall that is not in compliance with the CC&Rs code. That wall turned part of the garage into a bonus room and it was there even before we moved in in October 2010.
The California Civil Code section 336(b) provides a five-year statute of limitation for a violation of a restriction as defined in Section 784 of the Civi Code.
Civil Code 784 in turn, defines "restriction" as "a limit on the use of property"
The 5 years runs from the time the person seeking to enforce the restriction (ie HOA) discovered or, through the exercise of reasonable diligence, should have discovered the violation.
Here is an article about it...
http://realtytimes.com/consumeradvice/hoaadvice1/item/28855-20140603-law-sets-time-limits-for-enforcing-homeowner-association-restrictions
In addition, just reading other notes, it seems that the HOA would be held negligent for not enforcing their rules against the person who violated them and can not charge the person who later bought the home who was not notified by HOA that there was a violation.
1) Does the 5 year statute of limitations per the California Civil Code section 336(b) apply here in your favor. We have the burden of proof on the HOA to prove that the wall was constructed less than 5 years ago.
3) If the 5 year statute of limitations does not apply, can the HOA penalize us for something a prior tenant did that they did not catch at the time. The had the opportunity to discover it by doing an inspection at the time of the open house in 2011 so were negligent in their responsibility at that time.
I appreciate if you know someone or if you can help with this issue.
Submitted: 1 year ago.Category: Real Estate Law
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3/14/2016
Real Estate Lawyer: socrateaser, Lawyer replied 1 year ago
socrateaser
socrateaser, Lawyer
Category: Real Estate Law
Satisfied Customers: 39,387
Experience: Attorney and Real Estate broker -- Retired (mostly)
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Hello,

I am a member of the State Bar of California, the bar of the U.S. District Court for the Central District of California, and a member of the California and National Association of Realtors. Please permit me to assist. You asked:

1-The buyer who cancelled the contract 2 days after they signed the removal of all the contingencies. They want their deposit back. Can we keep their deposit according to the real estate law?

A: The answer depends nearly entirely on the purchase agreement terms and conditions. If this is a standard Cal. Association of Realtors Residential Purchase Agreement (RPA), then what typically happens is:

1. The seller refuses to release the deposit;

2. The buyer activates the RPA mediation clause;

3. The parties either agree to mediate, and eventually settle on the amount of the deposit that will be retained or returned;

4. If no settlement reached, then if the deposit amount is greater than $10,000, and the RPA was initialed agreeing to arbitration, then the buyer must file a demand for arbitration with an arbitration organization, and that will trigger an adversarial proceeding between the parties. The parties may decide to hire legal representation, at which point, the cost of arbitration will skyrocket, generally leading to another attempted settlement of the dispute.

5. If the amount is not greater than $10,000, the buyer can sue in small claims court for a resolution of the matter. The likely outcome in small claims will be that if the buyer cancelled without proof that the seller violated the contract or there was a mistake about the property condition that the seller should have disclosed, then the seller will win. Otherwise, the the buyer will win.

6. I the amount is greater than $10,000 and the arbitration clause was not initialed, then the buyers will contact a lawyer and discover that it will likely cost at least $25-$50,000 in legal expenses to resolve the dispute, at which point, the buyer will either do nothing for a period of time, sufficient to trigger the escrow agency's obligation to file an "interpleader" in court to force the resolution of the dispute -- at which point, most of the money in escrow will be used up in legal expenses.

The point of all of this is that even though there may be a liquidated damages clause in the RPA that was initialed by the parties, reality is that in most cases the only way for either buyer or seller to get any money out of escrow is to try to settle the dispute. Otherwise, the only person who gets any money will be the lawyers. Which is great for someone like me, but not for anyone else.

So, try to use the mediation process and hopefully the matter will settle and you can get some dough.

1) Does the 5 year statute of limitations per the California Civil Code section 336(b) apply here in your favor. We have the burden of proof on the HOA to prove that the wall was constructed less than 5 years ago.

A: You're correct that the statute of limitations is 5 years. Based upon your description of the circumstances, it appears that you cannot be forced to remove the wall. See Pacific Hills HOA v. Prun. (2008) 160 Cal.App.4th 1557 (Boards must timely enforce violations of the association's governing documents, otherwise they can lose the right to bring an action to enforce a particular violation).

3) If the 5 year statute of limitations does not apply, can the HOA penalize us for something a prior tenant did that they did not catch at the time. The had the opportunity to discover it by doing an inspection at the time of the open house in 2011 so were negligent in their responsibility at that time.

A: If Section 336(b) doesn't apply, then you can't be penalized for what may have been done by a previous owner. However, if that person was your tenant, and you were the owner, then you had an obligation to follow the CC&Rs, so you could be held liable. But, since it appears that the statute of limitations does apply, so you may have nothing to worry about.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, the website retains your entire payment, and I receive nothing for my efforts in your behalf.

Thanks again for using Justanswer!

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