Transactions

Breach of Contract
Real estate purchases can become quite problematic what with the complexity of the modern purchase contract forms.  A seller or buyer may fail to perform some term contained in the contract. This may or may not result in a breach. 

There are many factors that bear on whether or not a party to a transaction is in breach.   A breach enables the non-breaching party to recover damages or equitable relief.  However, unless there is an express repudiation, while performance under the contract is pending on both sides and prior to the agreed closing date, one party cannot claim the other breached its obligations under the contract without the former, in a timely manner, performing all condition precedents and at least offering to perform all concurrent conditions to such obligations as not then performed.

If the buyer breaches the contract and a liquidated damage provision is initialed by the parties and meets certain statutory guidelines, the deposit becomes the sole damages to which the seller is entitled.

If the seller breaches, or the buyer breaches and there is no effective  liquidated damage clause, damages consist of the difference between the  contract price and market price (i.e. the benefit of the bargain) of the property along with any 'consequential damages' within the contemplation of the parties.

With a seller's breach the buyer can seek specific performance of the contract as an alternative to damages. This would be available where the sales price of the property at the time of entering into the contract is fair (i.e. not substantially lower than market). A notice of lis pendens would need to be recorded if specific performance is sought in order to protect the buyer's right to the property during the pendency of the dispute as against any subsequent purchasers of thereof.

Fraudulent inducement
A fraudulent inducement by the seller in connection with a real estate sale can allow the buyer damages or alternatively rescission. Such conduct by the seller generally consists of a deliberate or negligent misrepresentation, or a concealment of or failure to disclose a latent material defect of which the seller is aware and the buyer is not.  If the seller's broker has engaged in such conduct the broker may be likewise liable and so may the seller even though the seller has not engaged in such conduct.

Mediation/arbitration clauses
With the appropriate clause in the new standard real estate sales contract initialed by the parties, any dispute arising from the contract has to be dealt with through private arbitration instead of by a law suit.  With or without initialing the clause the standard sales contract requires that the parties mediate a dispute before going on to private arbitration or filing suit. If one of the parties refuses to mediate that party loses the right to recover costs if that party ultimately prevails. 

If one of the parties fails to submit to private arbitration the other party can obtain a court order compelling arbitration or in the alternative sue in Court. In any event if the buyer seeks specific performance, a suit would have to be filed in any event in order to record a notice of lis pendens.

The bad news; private arbitration awards are not appealable. If the award is obtained by trial, or court arbitration in a law suit rather than private arbitration, the award would be subject to appeal if obtained by trial and 'trial de novo' if obtained by court arbitration.

Broker Liability
Real estate brokers are in quite a precarious situation with regards to their liability in a sales transaction. The listing broker is the agent for the seller only but the purchaser's broker (generally called the selling broker) is usually an agent for both the seller and purchaser. An agent has fiduciary duties towards his client (see below). 

In addition to his fiduciary duties to the seller, the listing broker has, in a residential transaction, a duty of due care to the purchaser. Failure in that duty resulting in loss to the purchaser gives rise to an action by the purchaser against that broker for negligence. 

The fiduciary duties owed by a broker to his client (that is the listing agent to the seller and the selling broker to both the buyer and, in most cases, to the seller) include that of loyalty, full disclosure, acting in good faith, competency, using diligence, honesty and using due care. A breach of any such duty is generally actionable if damages result, as constructive fraud or at least negligence where the duty of due care is not exercised. 

Contact us about your legal matter today!