When a seller is bound by an agreement for purchase and sale for a residential property, and there is a dispute or breach of the contract, the court can order specific performance in real-estate litigation cases. Specific performance is when the Court issues an order requiring a party to complete their end of the deal. This is used in situations where no other solutions would adequately compensate the other party. For example, specific performance would require the seller to close on the property transaction. However, for the Court to grant specific performance, the property needs to be considered unique.

When evaluating uniqueness, factors such as the purchaser’s “wish list” market conditions, location, type of home, condition of the home, availability of comparable homes with similar price ranges, and proximity to specific amenities are usually considered. If another property cannot satisfy these criteria, then the property will be considered unique and specific performance will be granted. Once granted, it is possible for the buyer to get compensated for their out-of-pocket expenses incurred due to the failed property transaction. This could include, legal fees, increased mortgage payments, appraisal fees, moving fees, and storage fees.

In Warner, a real-estate litigation case, a purchase agreement (“Agreement”) was signed for a co-operative unit for $340,000 on August 18, 2021. Before the closing date of November 22, 2021, Warner, the buyer, fulfilled all her contractual obligations, such as financing and obtaining approval from the board. On November 4, 2021, Ahmadi, the seller, informed Warner that he would be unable to close the transaction as his spouse, with whom he was involved in a family law litigation, rejected the sale. Ahmadi requested for Warner to sign a mutual release to terminate the Agreement, but she refused to do so. On November 18, 2021, Ahmadi’s spouse obtained an order that required the property sale proceeds to be held in trust due to their ongoing dispute. Even though this order did not prevent the sale from proceeding, Ahmadi still failed to close.

The Court found that Warner was prepared to close on the transaction, making her the innocent party. On the other hand, it was found that Ahmadi had anticipatorily breached the Agreement.

In this case, Ahmadi submitted four properties that he contended were available and comparable to the property. However, it was determined that none of the properties were comparable alternatives, as two were out of Warner’s budget, the third had higher maintenance fees, and the fourth was smaller and had a higher purchase price. Thus, the original property was considered unique, and the Court granted specific performance as a remedy.

Furthermore, the Court granted Warner compensation for legal fees, increased mortgage costs due to higher interest rates, appraisal fees, moving fees, and storage fees. However, it was noted that if Warner were able to secure a mortgage lower or equal to her original rate, she would not be entitled to compensation for her mortgage.

Takeaways

As experts in real-estate litigation, we often advise parties when reviewing potential liabilities arising from agreements of purchase and Sale.

The decision in Warner underscored two crucial points. First, to counter specific performance claims from the buyer, sellers must prove that there were comparable properties at the time the Agreement was breached. Second, sellers must be prepared to pay for out-of-pocket costs incurred by an innocent buyer due to their breach.

On the other hand, we also assist buyers regarding their rights if the seller has breached their contractual obligations. As shown in Warner, aside from being prepared to close before the closing date, buyers need to keep track of their out-of-pocket expenses incurred as well.

Real estate litigation can be a challenging area of law to find definitive answers, as those depend on fact specific situations. We are happy to advise you on your real-estate litigation matter.

Sellers and buyers may contact us at any time regarding their questions on their rights.