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legalgems
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Category: Real Estate Law
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I put $45 thousand down on a new construction condo in

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I put $45 thousand down on a new construction condo in December 2016. Closing scheduled for June 28th. Paying cash for home because selling present residence. Found out in May2016 I cannot live in home due to unexpected bilateral knee replacement surgery. Home is up a flight of stairs to get to main living areas
JA: Because real estate law varies from place to place, can you tell me what state this is in?
Customer: sent builder notification from surgeon. Builder still holding me responsible for purchase. Cannot purchase and sell because I cannot sell present residence. Can I get any of my $45 Thousand back?
JA: Has any paperwork been filed?
Customer: I emailed them that I could not purchase the home due to inability to live there, sent them a letter with surgeon notes attach ref. The builder told me he was keeping the entire deposit. He moved the closing date to August 16 th. I was trying desperately to grt the 300 thousand in cash by that time so I could close and not lose my 45. Tried every avenue but could not get the money. Informed them via gmail on August 15 that I could not close on this home. Told them I was unable to purchase it or live in it. Had surgery August 18th. Was in hospital for several weeks. No word from the. Am contacting you now that I am able to communicate
JA: Anything else you want the lawyer to know before I connect you?
Customer: No

Hello! I will be reviewing your question and posting a response momentarily; if you have any follow up questions please respond here. Thanks!

I am very sorry to hear this;

did the deposit provision have any exclusions which allowed the buyer to back out without forfeting the deposit?
also what state is this in regards ***** *****?

Customer: replied 1 month ago.
I am unable to find any reference that states any exclusions which exist that would allow me the buyer to back out without forfeiting the deposit. This home is in the state of P A. My thinking is this: unexpected issues come up in life which we were not in control of. When one purchases an airline ticket that is non refundable; if there is a death in the immediate family the airline reimburses the passenger with presentation of a death certificate. STuff happens. CAn I be out 45 thousand due to something which occurred that I Amy unable to control. I understand the home was built
Customer: replied 1 month ago.
For me specifically due to upgrades I chose. I can understand there may some amount of penalty due to this inconvenience; but 45 thousand? It doesn't feel legal. Much Thanks

Unfortunately a deposit is a liquidated damage clause, and those are generally enforceable. Unfortunately the legislature does not often take into account exceptional circumstances and that can result in unjust results when the laws are uniformly applied.

Per Palmieri v. Partridge a liquidated damage clause is generally enforceable so long as it is not deemed to be a penalty. Palmieri cites " Traditionally, a forfeiture that reflects nine percent, see Laughlin v. Baltalden, Inc., 191 Pa.Super. 611, 159 A.2d 26 (1960), or ten percent, see Kraft v. Michael, 166 Pa.Super. 57, 70 A.2d 424 (1950), of the purchase price is not tantamount to a penalty."

Unfortunately I could not locate any case law that made an exception due to circumstances beyond one's control. Even the airlines have severely restricted or terminated the bereavement fares in recent years.

Generally to invalidate a liquidated damage provision it would be necessary to show that it constituted a penalty - please see:

2718. Liquidation or limitation of damages; deposits.

(a) Liquidated damages in agreement.--Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.

http://www.legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=13&div=2&chpt=27

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Customer: replied 1 month ago.
Thank you for your reply. Just to be sure I understand... There is nothing I can do? The builder is entitled to the $45 000. Thank you

Unless there is a provision stating unforseen medical condictions void the liquidated damage provision; or there is another basis for not completing the transaction (ie didn't pass inspection) or the provision is deemed void due to being a penalty, then generally the deposit is lost if the buyer fails to comply with the terms of the contract.

Larger deposits are generally permissible in new homes when the buyer requests certain upgrades to compensate the builder in case the deal does not go through.

Customer: replied 1 month ago.
Thank you for your help. Greatly appreciated. The advise was excellent.

You are most welcome!
Glad to have helped.

Have a great evening.

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