Like any other contract, an agreement for a sale and purchase of real estate is an enforceable document, and a breach of its terms entitles the party who was harmed to damages that must be supplied by the party who breached the contract. That said, the complex nature of real estate contracts has resulted in an amount of law arising around these agreements. These include, for example, the stipulation in Arizona’s statute of frauds that a real estate agreement is only enforceable if the party claiming breach can produce a written and signed document (an oral contract for the sale of the property is not enough). And most real estate purchase agreements contain contingencies—which are elements that, should they occur, permit the parties to exit the contract without it being considered breach. (For example, if the contract is made contingent upon the potential buyer having sold their previous home by a certain date, and that date comes without the sale of that previous home, then the contract may be canceled—the seller of the home in question may go on to entertain other purchase offers and the potential buyer may move on to search for other properties.) And then there is the fact that a given parcel of real estate is such a unique form of property that, in the case that a breach (not supplied for in the contract’s contingencies) should occur, a court may determine that specific performance is called for.
Specific performance, put simply, is the fulfilling of a contract as though the breach to the contract had not occurred. It is considered an exceptional remedy—courts generally favor damages in the form of money paid. But real estate is one area where specific performance is sometimes considered appropriate, and the land transfer is therefore enforced.
Those conditions under which money damages are not considered appropriate is situational. Where a seller is in the position to fulfill their duties as outlined in the purchase agreement but simply decides not to, then a court may choose specific performance. Likewise when the seller could transfer only some smaller portion of the property—the court might then order the transfer of that portion, and require the buyer only pay for the portion transferred. Often when a buyer has decided to enforce a contract against a breaching seller, they will file a lis pendens form with the county land records office where the property is located, to decrease the likelihood of the property being sold until the lawsuit has been settled. If the seller goes ahead and sells the property out from under the lawsuit anyway, and the court decides for specific performance in favor of the initial buyer, the party who purchased the property despite the lis pendens will still be required to turn title of the property over to the initial buyer in specific performance, and must then seek monetary remuneration from the initial seller.
Naturally, the best course of action when a purchase agreement is breached is to consult with a qualified attorney. Provident Law’s real estate attorneys have experience with exactly this sort of issue. Moreover, if you’re looking to invest in real estate in Tempe or anywhere else in the state of Arizona,we stand ready to help. We structure, negotiate and document a variety of real estate and financing transactions, such as leases, purchase and sale agreements, loans and development agreements for a variety of commercial and residential projects. Contact us for more details.
Christopher J. Charles is the founder and Managing Partner of Provident Law ®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS ® (the “AAR”). Mr. Charles holds the AV ® Preeminent Rating by the Martindale-Hubbell Peer Review Ratings system which connotes the highest possible rating in both legal ability and ethical standards. He serves as an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions.
Christopher is a licensed Real Estate Instructor and he teaches continuing education classes at the Arizona School of Real Estate and Business. He can be reached at Chris@ProvidentLawyers.com or at 480-388-3343.