March 31st, 2025 at 1:31 pm
Multiple Choice Question: What is the proper way for the buyer to cancel? Pick the best answer:
A. The buyer must first serve a 2-day Notice to Seller to Perform for the repairs.
B. The buyer must first serve a 3-day Demand to Close Escrow.
C. The buyer can cancel under the buyer’s contingencies.
D. Any of the above.
Answer: Answer A is wrong (so Answer D is wrong too). It’s true that, if the buyer is cancelling for no reason other than the seller’s failure to do the repairs, the buyer must first serve a 2-day Notice to Seller to Perform (NSP) before cancelling (see RPA paragraph 14D(2)). However, a buyer is not limited to just one reason for cancelling, plus the buyer in this particular Fact Pattern does have other reasons for cancelling. Additionally, the problem with serving a 2-day NSP is that it gives the seller 2 days to perform. The seller could do the repairs within those 2 days, in which case, the buyer would no longer be able to cancel due to the seller’s nonperformance.
Answer B is also wrong. If the buyer is cancelling for no reason other than the seller’s failure to close escrow as scheduled, the buyer must first serve a 3-day Demand to Close Escrow (DCE) (see RPA paragraph 14G). But as discussed above for Answer A, the buyer in this Fact Pattern may have other reasons for cancelling. Also like Answer A, the problem with serving a 3-day DCE is that the seller could be ready to close within 3 days, in which case, the buyer would no longer be able to cancel due to the seller’s failure to close escrow.
Answer C is the correct answer. The buyer can cancel under a good faith exercise of the buyer’s contingencies (see RPA paragraph 14D(3)). In the C.A.R. Cancellation of Contract form, the buyer should fill in paragraph 1A(1) to say, “As permitted by the good faith exercise of paragraph 14 of the Agreement.”
Of course, if the buyer wants to give the seller another warning before cancelling, the buyer can opt to serve the NSP and/or DCE. But if the buyer just wants to cancel, as in this Fact Pattern, the buyer should cancel under the buyer’s contingencies, and request that the buyer’s deposit be returned to the buyer.
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