How Toll Brothers Uses This Clause
Toll Brothers purchase agreements have been documented to include deposit forfeiture / earnest money trap provisions. The contract may allow Toll Brothers to retain the buyer's deposit as liquidated damages if the buyer cancels. In at least one arbitration proceeding, an arbitrator found Toll Brothers' liquidated damages provision unenforceable and ordered the return of deposit funds to buyers who could not secure financing. Deposits on luxury homes can be substantial given the company's average sale price. This clause has been the subject of litigation, including Noohi v. Toll Bros., Inc..
This provision typically appears within the purchase agreement alongside other terms that may limit buyer remedies. Because Toll Brothers operates across multiple states, the enforceability and practical impact of this clause varies depending on where the home is located.
As a builder operating in the upper price segments, Toll Brothers buyers may have somewhat more leverage to negotiate contract terms compared to entry-level buyers. However, the presence of this clause in standard purchase agreements means buyers should review it carefully regardless of price point.
Builder-Specific Details
Combined with Mandatory Arbitration
Deposit disputes must go through arbitration, where the cost may approach or exceed the deposit itself.
Standardized Across Markets
Toll Brothers's scale means contract templates are largely standardized across its operations. This clause identified in one state's contract is likely present in other states' contracts, though local addenda may modify the terms.
Negotiation Potential
Toll Brothers operates in higher price segments where buyers may have more leverage to negotiate individual contract terms. While the clause appears in standard templates, buyers of custom or semi-custom homes may have more room to request modifications.
Legal History
The following cases involve Toll Brothers's use of this clause type.
Noohi v. Toll Bros., Inc.
In a putative class action, prospective buyers alleged Toll Brothers refused to return deposits when buyers could not obtain mortgage financing. The Fourth Circuit affirmed the district court's holding that Toll Brothers' arbitration provision was unenforceable because it required the buyer — but not the seller — to submit disputes to arbitration, lacking mutuality of consideration under Maryland law. Toll Brothers petitioned the U.S. Supreme Court for review; the petition was denied.
State-by-State Enforceability
Enforceability of this clause varies by state. The following reflects Toll Brothers's operating states.
| State | Status | Note |
|---|---|---|
| California | Likely Enforceable | California has one of the most detailed statutory frameworks governing liquidated damages in... |
| Texas | Likely Enforceable | Deposit forfeiture clauses in new construction contracts are generally enforceable in Texas when... |
| Florida | Likely Enforceable | Florida courts generally enforce deposit forfeiture provisions in new construction contracts when... |
| Arizona | Likely Enforceable | Arizona courts enforce deposit forfeiture clauses as liquidated damages when the amount is... |
| Colorado | Likely Enforceable | Colorado courts enforce liquidated damages clauses, including deposit forfeiture provisions, when... |
| Nevada | Likely Enforceable | Nevada courts enforce liquidated damages provisions when the amount is reasonable relative to... |
| Virginia | Likely Enforceable | Virginia courts enforce liquidated damages provisions in real estate contracts when the amount bears... |
| Maryland | Likely Enforceable | Maryland courts enforce liquidated damages clauses when the amount is a reasonable estimate of... |
| Pennsylvania | Likely Enforceable | Pennsylvania courts enforce liquidated damages provisions when the amount is a reasonable... |
| New Jersey | Likely Enforceable | New Jersey courts enforce liquidated damages provisions when the amount is reasonable in relation to... |
| New York | Likely Enforceable | New York courts enforce liquidated damages provisions when the amount is reasonable and not clearly... |
| Connecticut | Likely Enforceable | Connecticut courts enforce liquidated damages provisions when the amount is reasonable in relation... |
| North Carolina | Likely Enforceable | North Carolina courts enforce liquidated damages provisions, including deposit forfeiture in new... |
| South Carolina | Likely Enforceable | South Carolina courts enforce liquidated damages provisions in real estate contracts when the amount... |
| Georgia | Likely Enforceable | Georgia courts enforce liquidated damages provisions when the amount is a reasonable pre-estimate of... |
| Tennessee | Likely Enforceable | Tennessee courts enforce liquidated damages provisions when the amount is reasonable in proportion... |
| Idaho | Likely Enforceable | Idaho courts enforce liquidated damages provisions when the amount is a reasonable estimate of... |
| Washington | Likely Enforceable | Washington courts enforce liquidated damages provisions when the amount is reasonable relative to... |
| Utah | Likely Enforceable | Utah courts enforce liquidated damages provisions when the amount is a reasonable pre-estimate of... |
| Michigan | Likely Enforceable | Michigan courts enforce liquidated damages provisions when the amount is a reasonable estimate of... |
| Illinois | Likely Enforceable | Illinois courts enforce liquidated damages provisions when the amount is a reasonable estimate of... |
| Delaware | Likely Enforceable | Delaware courts enforce liquidated damages provisions when the amount is a reasonable estimate of... |
Related Clauses in Toll Brothers Contracts
This clause often works in combination with other provisions in Toll Brothers's purchase agreements.
Deposit disputes must go through arbitration, where the cost may approach or exceed the deposit itself.
Incentives tied to using the preferred lender may be lost if the buyer switches lenders, and the deposit terms may reflect this.
What Buyers Can Do
- Understand exactly when your deposit becomes non-refundable. The contract may specify triggers that make the deposit non-refundable before you expect. Read the forfeiture conditions carefully.
- Know the cancellation provisions. Review what happens to your earnest money if you need to cancel. Toll Brothers's contract may allow deposit retention even in circumstances beyond your control.
- Review the Noohi case. The Noohi v. Toll Bros., Inc. ruling may be relevant to your situation. If you are buying a Toll Brothers home in a state with similar legal protections, this precedent could affect the enforceability of this clause.
- Have the full contract scanned before signing. This clause is often one of several interconnected provisions in Toll Brothers contracts that collectively limit buyer remedies. A contract scan can identify all of them.