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CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10244
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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We were transferred from Indiana to Tennessee in May. Over

Customer Question

We were transferred from Indiana to Tennessee in May. Over the past few years, I have had some medical issues which caused a financial hardship and damaged our credit. When house hunting, we found a builder spec. The builder entered into an early occupancy agreement with us for 90 days while we repaired our credit to be financed. The big factor was that we put our entire down payment of $60,000 in escrow and it be non refundable. We were working with their lender and sold our house based on his pre approval. We thought we were going to close without the EOC. Our belongings were being loaded on the moving truck and were supposed to close the following day when all of this fell apart. Essentially, we either agreed or we were homeless. In the EOC, the builder added the line item that they would extend the EOC an additional 30 days if we could provide a pre approval letter that confirmed we would close in that 30 days. We ended up needing that extension. We provided the letter. The amendment we received allows the extension, but also added a penalty of $1,000 per day after the deadline if we do not vacate immediately. We were told if we do not sign that they will start legal proceeding now. Is the additional penalty something they can add given the original terms that the down payment is non refundable? We have also been paying rent that is not being applied to the purchase. We thought that was fair given that they were agreeing to early occupancy. We have every confidence that we will close in time. However, we feel bullied into this and feel that this penalty could expose us to more financial damage should something catastrophic happen. We were told today that we either sign or walk. They were not open to any negotiation. Ultimately, can they add this verbiage to amendment that was just suppose to extend the original agreement by 30 days? Thank you for your assistance. Jamie E.
Submitted: 11 months ago.
Category: Real Estate Law
Expert:  CalAttorney2 replied 11 months ago.

Hello, My name is ***** ***** I will assist you today. Please give me a few minutes to write a response and identify any additional resources for you.

Expert:  CalAttorney2 replied 11 months ago.

I am sorry to learn of this situation.

Unfortunately when you failed to close as agreed upon, you were in breach of contract - this opened the contract to renegotiation, and the terms that were demanded by the seller as a "take it or leave it" offer were the new contract.

(They could have argued that you were in default and that your default meant you forfeited both the home and your entire down payment).

Customer: replied 11 months ago.
I want to clarify that in the original contract, they agreed to extend the EOC by 30 days if we could provide an approval from the lender and we did. Does this not just extend the original terms? They sent over the "extension", but included the penalty as well as everything we previously agreed upon.
Expert:  CalAttorney2 replied 11 months ago.

Thank you for the clarification.

In that case - no they cannot modify an agreement/contract that was already formed.

The new terms were not agreed on and they cannot add a penalty clause that was not already there.

(although I could still be misunderstanding your clause (please forgive me sometimes the "Q&A" format can be a little difficult, which is part of the reason we do not give formal legal advice), the penalty clause only kicks in if you miss the 30 day extension - if this is the case, they are not modifying anything that you agreed to (you get the full 30 days that you agreed to with no additional terms or modifications), but if you go over that 30 days, then they are including penalties - so you would be in breach at that point?)

Customer: replied 11 months ago.
that is correct. They are allowing the 30 days, but then added the new penalty. The EOC already allows for the downpayment to be non refundable if we do not close and have to vacate. Now, it is the down payment plus $1,000 per day thereafter.
Expert:  CalAttorney2 replied 11 months ago.

Are they allowing you to stay in the home and try to complete your financing if you continue paying the $1,000.00 if you exceed the closing date?

(If so this would be a new offer, new contract).

Otherwise, you would be forced to vacate at the end of 30 days, relinquish the down, and suffer an eviction.

Or is this adding a $1,000.00/day penalty to an eviction (meaning they not only want to be able to evict you (you get no additional time to get financing), and they get money damages for the additional days)?

Customer: replied 11 months ago.
This is in addition to an eviction.
Expert:  CalAttorney2 replied 11 months ago.

They cannot modify the contract unilaterally.

The new terms would be unenforceable. (To deal with this it may take litigation (so if they try to sue you to recover the $1,000/day you can defend such a lawsuit by claiming that the contract clause is "void ab initio" (invalid as soon as it was written), should it come to that, but one party cannot unilaterally change the terms of a contract).

Customer: replied 11 months ago.
We sent a new extension to the builder and explained why we will not agree to the new penalty. They said the old contract is expired and if we don't sign, they will be here with a sheriff to make us vacate. We sent them the approval letter as required before the contract ended. They sent us the new extension the day after the contract ended. Now that we aren't agreeing to their terms, they are holding the contract expiration over us, even though we did what we were supposed to do to extend the 30 days. Can they force us to sign by threatening us with this? We feel like a gun is being held to our heads and we don't have a choice. Once this transaction is closed, do we have any recourse for their actions? Thank you!
Expert:  CalAttorney2 replied 11 months ago.

The new terms should not be enforceable - they are trying to create new contract terms for an already existing contract without providing you anything new.

But usually this would become an issue when they actually were trying to enforce such a claim - not before.