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Old 10-28-2010, 07:57 AM
 
22 posts, read 52,210 times
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Yes, Cherrytwist makes a good point, this clause was probably put it in the event that prices were good and buyers were not closing, the Developer would want the property back and there are clear and easy terms in the contract that would allow them to take it back and resell it (only really attractive if values are strong).

That clause DOES NOT say that they have unlimited liabilty, it says that IF the developer chooses to exercise that clause they are entitled to the deposit as damages, it further goes on to say that the amount of the deposit that is kept cannot be more than the greater of 15% or actual damages, it actually protects someone that put a very high deposit down from having all of their deposit seized if there werent real damages. For example, if you put down 50%, and the developer seized the unit and resold it for a profit you would only lose the amount of your deposit representing 15% of the original purchase price. If however he seized your unit and resold it for 50% of the original purchase he could seize the entire deposit. The GREATER THAN clause does not change the earlier language that defines his remedy as seizing your deposit. If a person put down 5%, he would still only be subject to losing his deposit (it sounds weird but when you read it carefully I am quite sure that is the correct way to read the clause)...

Unfortunately all a moot point unless the Developer chooses to exercise his OPTION to terminate the contact under that provision, which he may but at this point he is at a minimum threatening that he would rather sue people to enforce the contract than terminate it.

Last edited by CharlotteJW; 10-28-2010 at 08:25 AM..
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Old 10-28-2010, 04:12 PM
 
171 posts, read 277,918 times
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"Actual" damages are defined as "agreed upon" damages. Agreed upon damages means to me what has been agreed to in the contract. So your example is incorrect. If the buyer agreed to cover the seller for the full sales price, then if the seller is forced to sell it to someone else due to default, the buyer is liable for the remainder of the contract price. i.e. the agreed to damages.

Furthermore, I believe that "termination" of the contract occurs once settlement has been reached. Settlement means the buyer has satisfied the damages in the contract and has a notarized document that releases them from further liability. Without this, they are rolling the dice for future lawsuits.

As I keep saying the wording in these contracts is important.
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Old 10-28-2010, 04:37 PM
 
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Cherry I feel like you completely misunderstood what I wrote...

The reading of that specific clause is not really that hard, I independently had someone else look at it that is experienced in contract law and they came to the same conclusion. It is a clause that provides the Developer with one option to pursue in the case of Default by a Purchaser.

I am making no claims about the rest of the contract or whether the developer will choose to exercise that clause (at this point it seems the contract provides for better remedies outside of using this provision).

Wording is absolutely important... and I deal with this type of issue frequently, I read it very carefully and I feel pretty confident that I interpreted it correctly.

If you are talking about this quote "...may retain all Deposits, as liquidated and agreed upon damages which Seller shall be deemed to have sustained and suffered as a result of such Default" It is clarifying that "retaining the deposits" is the "liquidated and agreed upon damages". If "agreed upon damages" had a seperate meaning defined somewhere else in the contract it would be capitalized as a defined term...

This is getting to be an unimportant argument of legal interpretation between a bunch of non-lawyers on a point that probably isnt relavent anyway because the Developer will not choose to terminate the contract under that provision anyway
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Old 10-28-2010, 04:49 PM
 
171 posts, read 277,918 times
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I did say that two clauses taken from a contract without the full context can't be definitive. Therefore, anything posted here is academic at best. Ultimately however if both sides decide to play hardball, and the seller decides to sue, then it will be up to both sides to convince the court what they thought the contract meant.

First, I would recommend attempting to work out a solution rather than going to court because if that route is taken, then one loses all control over the outcome. However, given that this seems to be difficult for adults these days and the court gets involved, then I can see the following problem for the buyer attempting to use the "legalese" in the document to get out of the additional damages. (beyond the initial deposit)

That is, one will have to go to the court with the position they believed their liability was limited to "X" based solely on the complicated wording in the contract. Yet a reasonable Judge might ask when did they, a legal novice, take notice of this wording and if they took such care on this, why didn't just put in clear contingency? It's a land mine that can be navigated successfully but one must take care not not to end up with a contempt of court (lying) charge. Those land mines are spaced very close.
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Old 10-28-2010, 07:05 PM
 
58 posts, read 89,259 times
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Folks, I really appreciate all these discussions. And based upon all that has been stated here, I am going to present all of these ideas to my lawyer. I did want to add one more piece of feedback that I got from a buyer today. It represents one camp of Vue Buyers that firmly believe all they have at risk is their deposit. I am not saying that camp is right. I am just saying that camp exists.

Hi Mike,
It's scary enough when real attorneys try and interpret the law, but now we google- informed consumers are doing the same thing. At least it gives us some information about where we stand. The following excerpts are from various Internet sources.

Liquidated damages clauses possess several contractual advantages. First, they establish some predictability involving costs, so that parties can balance the cost of anticipated performance against the cost of a breach. In this way liquidated damages serve as a source of limited insurance for both parties. Another contractual advantage of liquidated damages clauses is that the parties each have the opportunity to settle on a sum that is mutually agreeable, rather than leaving that decision up to the courts and adding the costs of time and legal fees.
Liquidated damages clauses are commonly used in real estate contracts. For buyers, liquidated damage clauses limit their loss if they default. For sellers, they provide a preset amount, usually the buyer's deposit money, in a timely manner if the buyer defaults.
At common law, a liquidated damages clause will not be enforced if its purpose is to punish the wrongdoer/party in breach rather than to compensate the injured party (in which case it is referred to as a penal or penalty clause). One reason for this is that the enforcement of the term would, in effect, require an equitable order of specific performance. However, courts sitting in equity will seek to achieve a fair result and will not enforce a term that will lead to the unjust enrichment of the enforcing party.[1]
In order for a liquidated damages clause to be upheld, two conditions must be met. First, the amount of the damages identified must roughly approximate the damages likely to fall upon the party seeking the benefit of the term. Second, the damages must be sufficiently uncertain at the time the contract is made that such a clause will likely save both parties the future difficulty of estimating damages. Damages that are sufficiently uncertain may be referred to as unliquidated damages, and may be so categorized because they are not mathematically calculable or are subject to a contingency which makes the amount of damages uncertain.
The issue here, as we see it, is the meaning of that part of section 13 that says the seller can't keep any more of the deposit than 15% of the purchase price or the amount of actual damages, whichever is greater. So, if the deposit is less than the 15%, the seller keeps that, if it's more than 15%, the seller gives the rest back to the buyer. We don't have a clue what, "or the amount of actual damages, whichever is greater," has to do in the context of this clause.
The whole purpose of the liquidated damages clause is to show agreement between buyer and seller at the time of signing the contract regarding default of the buyer, and to set the remedy at that time, instead of asking a court of equity to decide what the actual damages are; an impossible task in many cases, and ours in particular.
Try this out on your (free) legal experts and see what they think.

And then a followup from this same buyer:

So, what we're saying is this: The reason MCL cannot, by law, sue us all for specific performance or any other remedy for default is that they have already agreed in our contracts to accept our deposits, and nothing more, as liquidated damages. Period, end, finish. Let's keep our fingers crossed that this is the case.
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Old 10-28-2010, 08:29 PM
 
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"So, what we're saying is this: The reason MCL cannot, by law, sue us all for specific performance or any other remedy for default is that they have already agreed in our contracts to accept our deposits, and nothing more, as liquidated damages. Period, end, finish. Let's keep our fingers crossed that this is the case."

Without seeing the contract, nobody here can comment on this except to say there is no law that would prevent MCL from suing the parties in question. While they may not prevail because of what is in the contract, based on what I have seen posted here, I don't think this is "case closed" "period".

I keep saying this,and I will say it again. Maybe the people this is directed to are not listening because they didn't listen to the advice of people in the first place. One more time, if a party intends not to close, they need to acquire a lawyer and get their advice on the next move. If they want this to end, that lawyer should contact the seller to let them know there won't be a closing, demand a settlement document for the deposit already paid which states no further liability exists and the contract is terminated. If the seller refuses, then you know where you stand and can then look at the next move. If the contract is as it is stated above, the lawyer can then sue MCL for termination. This will quickly sort it out as it will show who has cajones and who doesn't. Running around like lemmings getting ready to fall off a cliff is not going to get anyone where they want to be.
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Old 10-29-2010, 04:37 AM
 
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Folks have gotten to the stage of letting the Vue know they won't close. They have gotten their notice of Default letters. They have been told they won't get a release. But no one has taken it to the stage after that, like the one you suggest. That would mean more expense (e.g. legal fees). So they live with the uncertainty and speculate like you see here in this forum. I think there are some folks that will be more aggressive legally, but that hasn't happened yet.
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Old 10-29-2010, 05:56 AM
 
Location: Wouldn't you like to know?
9,114 posts, read 15,671,846 times
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Quote:
Originally Posted by vuebuyer10 View Post
Folks have gotten to the stage of letting the Vue know they won't close. They have gotten their notice of Default letters. They have been told they won't get a release. But no one has taken it to the stage after that, like the one you suggest. That would mean more expense (e.g. legal fees). So they live with the uncertainty and speculate like you see here in this forum. I think there are some folks that will be more aggressive legally, but that hasn't happened yet.
Here's the issue I have. If some of them have the means to close (which I'm sure they do), why do they choose not to?

If you tell me they don't "want to throw good money after bad", that just tells me they are not interested in living in the condo and the financial investment is most important (which is the wrong reason to buy a "home").

If they have the means, they should've closed already....
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Old 10-29-2010, 06:18 AM
 
58 posts, read 89,259 times
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Couponjack, you and I are not quite seeing eye to eye, but I want you to know I am trying to meet you half way. Here is what I really want to understand from you. Let's look at our assumptions. I assume the majority are not able to close because the appraisals are coming in too far away from contract price and they don't have the cash to make up the difference. It seems that you assume that is @$#@, that they do have the cash despite the appraisals. It will be difficult to determine who is correct on that unless there are lawsuits for specific performance. The other assumption I have is that the HOA is going to be cash starved, and the building maintenance could suffer greatly because of it. Either that or there could be large assessments down the road to make up the shortfall. The third assumption is that the building will go under a legal cloud, especially if the units don't sell and the lenders step in. To me, these are all legitimate reasons to at least hold off closing on a unit, even if you do want to live there and are willing to take a loss now and wait for values to come back in future years. This is just my initial thinking on this, but it appears you don't agree. Are there any conditions that I could present to you that would make you hold off on closing if you had signed a contract back in 2005? Or are you so firm that a contract is a contract that no matter what scenario is presented, you would fulfill your contract and close? If there are conditions that would have you hold off, what would they be?
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Old 10-29-2010, 07:03 AM
 
Location: Wouldn't you like to know?
9,114 posts, read 15,671,846 times
Reputation: 3695
Quote:
Originally Posted by vuebuyer10 View Post
Couponjack, you and I are not quite seeing eye to eye, but I want you to know I am trying to meet you half way. Here is what I really want to understand from you. Let's look at our assumptions. I assume the majority are not able to close because the appraisals are coming in too far away from contract price and they don't have the cash to make up the difference. It seems that you assume that is @$#@, that they do have the cash despite the appraisals. It will be difficult to determine who is correct on that unless there are lawsuits for specific performance. The other assumption I have is that the HOA is going to be cash starved, and the building maintenance could suffer greatly because of it. Either that or there could be large assessments down the road to make up the shortfall. The third assumption is that the building will go under a legal cloud, especially if the units don't sell and the lenders step in. To me, these are all legitimate reasons to at least hold off closing on a unit, even if you do want to live there and are willing to take a loss now and wait for values to come back in future years. This is just my initial thinking on this, but it appears you don't agree. Are there any conditions that I could present to you that would make you hold off on closing if you had signed a contract back in 2005? Or are you so firm that a contract is a contract that no matter what scenario is presented, you would fulfill your contract and close? If there are conditions that would have you hold off, what would they be?

Where did I say a "majority" could close? Again, do not put words in my mouth. I said "some". I'm sure some of them could've closed already (had the funds to do it), but chose not to because the "value" of the condo has dropped.....

The way I see it is the buyers (NOT ALL) want their cake and eat it too. If home "values" have gone up, we wouldn't be having this conversation.....

There are some buyers (at least some) making living in the condo long term not the number 1 priority.

That's the minor problem I have w/some of these people...
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