Breach of Real Estate Contract
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What's a Breach of Real Estate Contract?
A breach of real estate contract may occur when the terms and conditions of a real estate contract are not followed. Real estate contracts can cover many different real estate issues, but they usually deal with a sales transaction. The contracts can also cover:
- Commercial property usage and rental
- Landlord/tenant rental agreements
- Leases and subleases
- Construction of residential developments
- Agreements regarding land usage and boundaries
Contracts for the sale of real estate need to be in writing in order to be valid. However, it’s a good idea for any type of real estate contract to be in writing, so that the parties have a record of the transaction in the event of a breach.
What Are Terms and Conditions of Real Estate Contract?
A real estate purchase agreement contains many terms and conditions. If either party breaches the terms and conditions stated in the contact, the other party may have a legal claim against the breaching party. Conditions in a real estate agreement usually include:
- Purchase price of the real estate
- Closing date
- Date when the buyer will take possession and move in
- Items that are included in the sale (lighting fixtures, carpet, plants, appliances)
- Items not included in the sale
- Description of the property sold
- Terms that the seller will provide clear title of the property
- Provisions of which party is responsible for what type of fees or expenses
If a party fails to comply with a term or condition that was agreed in the real estate contract, the parties must try to resolve the dispute through a dispute resolution process if one is included in the contract. If it determined that a party has failed to comply to the terms and condition which resulted in a breach of contract, the non-breaching party can collect damages from the breaching party
What Are Some Ways That a Breach of Real Estate Contract Can Occur?
Breaches: A breach of real estate contract can occur in many different ways. Some common forms of breach of a real estate contract may include:
- Failing to pay on time
- Failure to deliver the deed to the property in the correct way
- Unauthorized sub-leasing of the property
- Contesting a real estate contract penalty clause
- Issues with implied warranty in a contract (such as habitability)
A breach of contract can happen on either side of the agreement. For instance, the seller may be liable for breach if they deliver a defective title. Or, the buyer may be in breach if they don’t supply their payment on the promised date.
Contingencies: Some real estate contracts or purchase agreements also contain many contingencies that must be met before the sale to continue. Some typical contingencies for a real estate contract include:
- An inspection of the home before the buyer takes possession or continues with the sale
- Buyer getting a mortgage or financing
- Buyer selling his current house
- Buyer getting a loan for a specified amount and interest rate
If the contingencies of the sale are not met, then it would not result in a breach of contract and either party can withdraw from the original agreement without paying a penalty. For example, if the buyer does not get the proper mortgage or financing that he wants, the contingency has not been met and the buyer can withdraw his offer and get a refund of any deposit he has made without being in breach of contract.
Are There Any Legal Remedies for a Breach of Real Estate Contract?
Remedies for a breach of a real estate contract will depend on the nature of the breach. In most instances, a damages award will be sufficient to cover the losses caused by the breach. For instance, a damages award might be required from the buyer to ensure that the seller receives missed payment amounts. In other cases, a different remedy might be needed, such as requiring the seller to deliver the deed to the purchaser.
Breach of real estate contracts can also be resolved through a dispute resolution process if the provision was contained within the contract. Many times buyers and sellers agree that if a type of dispute were to arise, they would take the dispute through a dispute resolution process. This process can include:
- Arbitration: Parties submit the dispute to a neutral arbitrator who will review the matter and decide the matter without having the dispute go to court.
- Mediation: This process involves a third party who assists the disputing parties to find a mutual solution to the dispute.
- Small Claims Court: Many parties take the dispute to small claims court to recover damages that are less than $3,000
Do I Need a Real Estate Lawyer?
Breaches of real estate contracts can sometimes lead to significant losses for either party. You may need to hire a real estate lawyer if you need assistance filing a claim for a breach of real estate contract. Your attorney can provide you with the legal expertise and guidance that is needed to protect your interests. Also, your lawyer can represent you during court proceedings and other meetings.
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Last Modified: 09-26-2014 03:59 PM PDT
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