Saturday, February 20, 2010
Deposit on 14 $million house has to be returned if sold for $15 mil
Does a seller of a $14 million dollar house get to keep a $620,000 deposit from a buyer who backs out? How about if the Seller immediately sells the house to a backup buyer for 15 million? Does it make a difference that these were sophisticated parties who had described the deposit as “non-refundable? That was the issue in a California appellate case from Orange County decided February 3, 2010. (Kuish v Smith) Relying on Civil Code section 3307, the court held that if the spurned seller came out of the deal with a profit, then the deposit must be refunded and the “non-refundable” clause is unenforceable. The deposit only gives the seller the limited practical advantage of shifting the burden to the buyer to show that the seller’s retention of the deposit constitutes unjust enrichment.