Daniel Warwick

I've been harping on CA's condo preconstruction/presale deposit problem for a while now. CA doesn't build condos mostly because CA state civil code essentially limits forfeitable preconstruction/presale deposits to 3% of sales price as liquidated damages. 3% is wholly inadequate when a buyer cancels a purchase contract. To keep anything above 3% the developer has a duty to mitigate and must prove damages. Developers have no appetite for protracted, costly and uncertain litigation, especially in CA which is the most consumer friendly state in the country. More importantly debt and equity capital won't accept CA's preconstruction/presale deposit regime incl need to litigate to prove damages. And without capital condo projects can't be built. Contrast CA with places like FL, NYC and Chicago that allow deposits and terms set by the market. In these places deposits in the 25%-30% and more are the norm. And as a result debt and equity capital feel their downside is mitigated and therefore these places build a lot of condos. The demand for condos in LA, SF and SD is certainly equal to FL, NYC and Chi. But condos aren't being built in our CA cities. The problem is our preconstruction/presale deposit law. For a good size condo projects debt and equity capital require pre-construction presales with 25%-30% forfeitable deposits or they won't lend/invest and therefore no project gets built. CA doesn't allow this, ergo no condos. I've spoken about this at length with @BuffyWicks including as recently as a couple weeks ago. Buffy absolutely gets it and wants to address the issue along with construction defect reform. The challenge is that way too many of our legislators are morons and intellectually dishonest. Getting to a legislative majority on presale deposit reform will be difficult. Many/most legislators will choose sound-bite politics and rail about how they will be protecting CA consumers by keeping forfeitable preconstruction/presale deposits at the 3% or maybe 6% level (still wholly inadequate). In reality they'll be killing off future potential condo projects to the detriment of consumers.