The Big Question about Broken Real Estate Contracts
Clients often ask me if a court will force a prospective seller who signed a real estate agreement of sale to transfer the property when the seller refuses to close. A party who breaches an ordinary contract may be responsible for money damages. But in the case of real estate, a buyer may ask the court to force the seller to complete the sale. The kind of lawsuit is called specific performance.
I recently represented a seller who signed an agreement of sale but refused to complete the transaction. In this particular case, the seller was diagnosed with a severe mental health condition. A person who lacks mental capacity cannot legally sell a property. Courts will declare agreements void when one party lacked capacity. However, sellers sometimes simply have cold feet. Will a court force a sale when the seller does not have an adequate excuse?
The general rule is that although a sale can be enforced through specific performance, it is not a matter of right for the buyer. It is not enough for the buyer to show that the seller breached a binding contract. A buyer must prove that the land is so unique to that buyer’s specific needs that no suitable parcel is available elsewhere. The law is mindful of the fact that a buyer may want the specific property for its unique properties. But because a buyer can seek monetary damages, courts will not force a sale if a hardship or injustice would result to the seller.
A seller does not have to pursue specific performance because a buyer’s breach is simply about money. If the seller later sells the property to a new buyer for less than the amount agreed with the original buyer, the seller may pursue the original buyer for the difference.
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