California Real Estate Practice Exam

A developer of a subdivision included a clause in each purchase agreement prohibiting signs offering individual properties for sale until he had sold all the subdivision. Until the developer completes sales of all parcels, which of the following is true?

1. Buyers cannot put up any signs, as it would be against the law

2. Buyers may put up any size sign to attract prospective buyers for resale

3. Buyers may put up reasonable size signs to attract prospective buyers for resale, for the original clause prohibiting signs would be unfair restraint and in violation of fair trade laws

4. None of the above

The correct answer is: Buyers cannot put up any signs, as it would be against the law

The correct answer reflects the legal enforceability of the clause included in each purchase agreement by the developer. Such clauses are often implemented by developers to maintain the integrity and marketability of the subdivision during its initial sales phase. This means that Buyers are bound by the terms of their purchase agreement, which prohibits them from placing any signs advertising their properties for resale until the developer has completed the sale of all parcels. While it's common for individuals to have the right to put up signs on their own properties, agreements made during the sale can legally restrict such actions. The clause in this scenario is a straightforward contractual agreement, which means that as long as it adheres to legal standards, the buyers must comply with it. Thus, any attempt by buyers to place signs would contradict this contractual obligation. The other options suggest that buyers might have the ability to put up some signs. However, those choices misunderstand the legitimacy of the contractual clause and the authority of the developer to impose such a restriction during the selling process. The clause aims not only to protect the developer's investment but also to maintain a consistent marketing message and aesthetic within the subdivision. As such, without the developer's consent, buyers must refrain from placing signs until all properties have been sold.