Bill > AB1406

This bill allows purchasers' deposits for undeveloped subdivision lots to be disbursed before closing to pay for project expenses, subject to specific conditions. Under the new provisions, developers can use purchaser deposits to cover construction costs, architectural and legal fees, and other project-related expenses, but only if the Department of Real Estate has issued a preliminary public report and the developer submits a comprehensive project budget and evidence of sufficient funds to complete the project. Importantly, the bill requires developers to obtain explicit, informed consent from purchasers before disbursing their deposits, which includes providing a prominent notice that explains the potential risks of such disbursement. The bill mandates that developers provide satisfactory security for project completion, such as performance bonds or letters of credit, and ensures purchasers can receive a full refund of their deposit if they are unable to close on the property, with only a potential 5% reduction in cases of purchaser insolvency due to bankruptcy or death. Additionally, the bill modifies existing liquidated damages provisions to allow developers to potentially retain the entire deposit if the specified conditions are met, providing more flexibility in handling failed real estate transactions for undeveloped subdivision lots.

Justice

https://leginfo.legislature.ca.gov/faces/billStatusClient.xhtml?bill_id=202520260AB1406