By Tracey Daniels O’Connell, Esq.
In order for a real estate contract to be binding it must be a written contract, signed by the parties, identifying (at a minimum) the parties, the property and the purchase price. Once a contract is binding, the parties are obligated to meet the terms and conditions of the contract and to take the actions they agreed to take. If either party fails to perform under the contract, the other party is entitled remedies.
The most common legal remedy is money damages. Money damages compensate the injured party for any financial consequences of the sale falling through. A buyer, for instance, could sue the seller for all of the costs incurred in connection with the transaction, including a return of the down payment, home inspection fees and survey and title fees.
If it is the buyer that fails to go through with the purchase, most residential real estate contracts in New York limit a seller’s remedy to retention of the down payment. In commercial real estate contracts, the remedies afforded both parties is often negotiated and may specifically permit a seller to sue for specific performance in the event of a breach by the buyer.
Another remedy is specific performance, which is an equitable remedy pursuant to which the party who breached or defaulted on the contract is required to fulfill the terms of the contract. Specific performance is granted at the court’s discretion. Recognizing that each parcel of land is unique and that a monetary award may be inadequate, a court may order the seller to convey the property to the buyer, according to the terms of the contract.
To obtain specific performance, the non-breaching party must show that he or she was ready, willing and able to perform under the contract (that is, buy or sell the property).
When a lawsuit is brought for specific performance, the plaintiff (the person bringing the suit) may file a notice of pendency to prevent any transfer of the property to a third person until resolution of the dispute. The notice is sometimes called a notice of lis pendens, and it is usually filed in the recorder of deed’s office. The effect of filing this type of notice is that the seller will not be able sell the property to another buyer while the lawsuit is pending.
Deals fall apart and defaults happen. A well negotiated contract can help you plan for the worst and to understand your rights in the event of a default. And then hope you never need to enforce them.
This article is written by a member of the Oxman Law Group, PLLC (www.oxmanlaw.com). Any comments or inquiries are welcome and can be directed to Marc Oxman at 914-422-3900 or moxman@oxmanlaw.com.
