Q: Can the refusal of a Construction Loan allow me to cancel a Contract with a builder ?
Hi !
I signed a contract with a builder and during the early design phase went through a divorce (with child support, etc...) my construction loan went from being green lighted to denied due to my new financial situation.
I asked the builder to refund a large amount of money I gave him for Permit Fees advance retainer. The builder refused and instead insisted that he could sue me for 30% of the total amount of the full construction cost.
The contract does stipulate "To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice. If you fail to cancel withing 3 days required by law you will be liable for up to 30% of the contract amount or a lien for the total amount will be put against your home."
No work whatsoever was done by the contractor on my project.
By law, can the fact that my loan was denied be enough to allow me to "cancel" the contract even-though not specified as a contingency in the contract ?
Thanks !
A:
I don't see a basis for cancellation in the fact that your loan was denied. The 30% cancellation term may be challenged if unconscionable as liquidated damages if the contractor has not lost anything of value (other work, purchased parts, subcontractor fees, etc.) in the 3 days since signing. It seems excessive. See: http://www.cslb.ca.gov/Consumers/Consumers.aspx
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