Legal Question in Real Estate Law in California

Can ''72-hour'' clause for removal of contingency be enforced by Seller?

I am selling my home in Orange County. I entered into a purchase agreement with a buyer, contingent on close of escrow of his current home within 30 days and contingent on his obtaining financing within 14 days.

The contract allows me continue marketing my home. If I accept another written offer, the contract provides that I can give the buyer written notice to remove both contingencies in writing. If the buyer fails to complete these actions within 72 hours after receiving such notice, the contract provides that I can cancel the purchase agreement.

There have been several better offers on my property since I entered into the purchase agreement. I plan to give 72-hour notice to the buyer very soon.

Is this ''72-hour'' provision of the contract enforceable? If the buyer fails to remove his contingencies within the 72-hour period and if I then cancel the contract, is there any way the buyer can tie up my property by refusing to accept the cancellation?

Asked on 3/12/02, 12:39 am

2 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law
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Re: Can ''72-hour'' clause for removal of contingency be enforced by Seller?

Do you have an agent/broker? If so, you should ask him/her this question first.

The following is a general guideline only, and should be used along with local advice:

Generally, the time clauses and terms relating to contingencies are enforceable as written if the agreement has a 'time is of the essence' clause. Most pre-printed contracts have such a clause. However, it is also customary in some areas to give a short grace period, perhaps 24 hours on a 72-hour requirement. Further, it is customary and sometimes legally necessary to give written notice to the affected party. You should be very careful to give any required notice in a timely and correct manner and be certain the notice was actually received by the other party. Read the applicable contract clauses carefully, noting which boxes are checked and what numbers are inserted in the blanks.

An unhappy outbid buyer might sue for specific performance and could perhaps tie up the property with a lis pendens. If you have carefully read and followed the contingency-removal provisions you should win the case but will have, at minimum, suffered a lot of grief.

Since local customs differ throughout California as to what form contract is used and whether grace periods are common, you really need to consult a real estate professional in your locality -- either a real-estate broker, preferably yours, or a local attorney, before throwing someone 'out of contract' for failure to remove a contingency upon notice to do so.

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Answered on 3/12/02, 2:17 am
Judith Deming Deming & Associates
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Re: Can ''72-hour'' clause for removal of contingency be enforced by Seller?

In theory, the provision, if properly drafted and agreed upon by the buyer, is enforceable. That said, any buyer can "tie up" your property by filing suit and recording a lis pendens on the property which could operate to prevent a sale to another party. If the lis pendens and/or the suit are frivolous or improper, they must be remedied in court, which costs time and money. An improperly filed lis pendens can be sought to be "expunged" by the appropriate motion filed with the court.

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Answered on 3/12/02, 12:36 pm

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