Resolving Disputes over Real Estate Sale Agreements
What happens when a buyer and seller sign an agreement of sale but the seller refuses to go forward with the transfer? A common question is whether a court will force the seller to transfer the property or simply award money damages for the breach. The buyer may file a lawsuit to ask the court to force the seller to complete the sale. The kind of lawsuit is called specific performance.
Money damages are the most often requested remedy in a real estate case. But sometimes a prospective buyer is so disappointed with a seller’s refusal to honor an agreement that they will pursue a specific performance case. In Pennsylvania, only the buyer can pursue specific performance. A seller can bring a claim against the buyer for loss of profits or other damages on an eventual resale to another party.
Specific performance relief is not automatic because the seller may have defenses to enforcement. For example, one defense is lack of mental capacity. A seller who was diagnosed with a severe mental health condition may not have had legal capacity to sign an agreement. 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.
As a real estate attorney, I help property owners resolve disputes. If you know someone involved in a real estate problem, please forward our contact information:
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