Assembly backs change to condo deposit rules to spur condo construction
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Summary
Lawmakers passed AB 14 06 to raise the liquidated-damages cap on condo deposits from 3% to 6% to improve financing for condominium development, while several members asked the author to include stronger consumer protections as the bill goes to the Senate.
SACRAMENTO — The Assembly adopted AB 14 06 on Jan. 20, a bill that raises the cap on liquidated damages a developer may claim on condominium deposits from 3% to 6% with the stated goal of unlocking financing and increasing for-sale condominium development.
Assemblymember Ward, the bill’s author, said the change would allow developers to use deposited funds more effectively and reduce reliance on more expensive debt, which he argued would lower development costs and expand ownership opportunities. "This change will unlock financing by increasing the amounts of your own deposited funds that could be used from our current statutory cap of 3% to 6%," Ward said on the floor.
Supporters including Assemblymembers Wicks and Bauer-Kahan cited low homeownership rates in California and said condos are an important pathway to first-time ownership. Several members noted the bill is a work in progress and urged Ward to incorporate additional consumer protections and parameters similar to a 2008 law (AB 2020) that temporarily allowed a higher cap with extra safeguards.
After discussion of stakeholder negotiations and expected Senate work to refine consumer protections, the Assembly passed the measure, 41–14. The author said he will continue to work with stakeholders and the Department of Real Estate as the bill moves to the Senate.
