New home sales occupancy clause

Asked by John Anderson, Virginia Thu Feb 19, 2009

Four months ago, we settledd on a new home from a builder whose sales contract has a clause stating that the buyer respresents and warrants that he/she is purchasing the property as their residence for one year, and that any attempt to TRANSFER the property (i.e., sell it) within the first year will result in a liquidated damages of 5% of the sales price. We had planned to sell our current residence and move into the new home. However, sales are terrible/prices have continued to slide since the April 2008 Sales Agreement. We are contemplating renting the new home; however, we are obviously still in our first year. The Sales Agreement does not specify any monetary damages if we rent the house. We're thinking that at the time of the Agreement (04/08), our intention was to occupy, but now almost a year later, we have changed our mind. Given the lack of specified damages in the Sales Agreement for renting, any thoughts regarding whether the builder can pursue damages against us?

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Tina Dubrule, , Gainesville, VA
Thu Feb 19, 2009
Call the builder and discuss your situation with them. Based on your circumstances, they may release you from this clause. Many builders provided those clauses in most cases to prevent owner's from flipping their home, (this was to reduce investor purchases, and the investors capitalizing on the builder's increase in the community values, and to cut down on the community sales competition).

You could consult an attorney's advice to see if renting is an option, all will depend on how your contract is worded, and that is where attorney's are the experts.

I have referenced RGS Title, you may be able to reach a real estate attorney through one of their offices.
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Alan Strange, Agent, Westminster, CO
Thu Feb 19, 2009
As with anything of this nature, consult an attorney. My opinion is that they put that clause in there for a reason and I'm sure it has teeth. I would recommend doing whatever you can to live out the original agreement. See what a real estate attorney thinks about renting since it's not transfering. Good luck.
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