Specific Performance Against Seller
Specific performance is a unique remedy that may be available in some cases. It is considered an equitable remedy and is used when traditional monetary damages do not suffice to resolve a legal dispute. One of the traditional areas where this type of remedy is available is in real estate transactions.
Basics of Specific Performance
In a real estate contract, parties may agree to a contract, such as for the sale of a home. If one of the parties does not honor the contract by breaching the terms of the contract, the harmed party often does not want money damages but instead wants actual performance of the terms of the contract. This remedy is known as specific performance. This remedy arises when a court orders the party to fulfill the contract. Specific performance is considered an equitable remedy and is governed by equitable principles. For this type of remedy to be available, several elements must be present, including:
A Valid and Binding Contract
For a court to order specific performance, there must be a valid and binding contract that can be enforced.
Damages Inadequate
Specific performance is only ordered in situations in which monetary damages would be inadequate to compensate the injured party. When specific performance is ordered, money damages are usually not ordered as the moving party is typically not entitled to both types of damages.
Mutuality of Obligation
Another element necessary for specific performance is mutuality of obligation, meaning that both parties have undertaken duties toward each other as part of the contract.
Judge’s Discretion
The parties can freely include the remedy of specific performance in their real estate contract. However, if this provision is not included in the contract, the potential for specific performance is left within the judge’s discretion. The trial court has the discretion to order specific performance after a party shows a breach of the underlying contract.
To be entitled to this remedy, the moving party must show that he or she substantially performed their part of the contract and that the party remains able to continue performing their contractual obligations.
Buyer’s Suing for Specific Performance
The buyer may pursue specific performance if the seller is unwilling to carry out his or her obligations under the contract. Specific performance is allowed in real estate contracts because each parcel of land is unique and monetary damages are not adequate. The buyer must tender the purchase price in order for specific performance to be granted. He or she should be able to show that he or she had appropriate financing from a lending institution, if applicable.
If the court orders specific performance, it orders the seller to convey the property to the buyer in accordance with the terms of their contract. In some situations, the seller may be required to provide a reduction of the purchase price but still otherwise carry out the contract. For example, if the seller agreed to sell a parcel but his ownership was for an area smaller than what was contracted for.
When a buyer is seeking specific performance, he or she may file a notice of pendency to prevent any transfer of the real property. This notice is typically filed in the recorder of deed’s office. This type of notice prevents the property from being sold to someone else while the lawsuit is ongoing.
Seller’s Use of Specific Performance
The remedy of specific performance is also available to sellers in many cases. A buyer may not want to go through with a sale and try to back out. However, some states allow the seller of real property to file a lawsuit against the buyer for specific performance. This remedy is permitted so that there is symmetry between the remedies available to buyers and sellers. However, this remedy is not available in all jurisdictions, such as in areas where the state believes that money damages are adequate to compensate the seller.
Additionally, the actual language of the contract can be determinative of whether specific performance will be a possible remedy. If the contract provides for one type of remedy and does not include specific performance, this remedy may not be available under the circumstances. For example, in many cases, the buyer’s deposit money is considered the exclusive remedy for many purchase agreements. The seller may be barred from pursuing collection of the entire purchase price because the deposit is considered earnest money which is intended to serve as liquidated damages.
Additionally, the seller will need to be able to show that he or she performed all of his or her contractual obligations before being able to request this remedy.
Craig Cherney is a trusted client advisor and a sought after real estate lawyer and expert witness who is hired by the nation’s top Real Estate Litigation Attorneys to help resolve their litigated real property matters. Craig has appeared as a testifying expert witness before judges and juries in California, Arizona, Nevada and other jurisdictions across the country. Craig Cherney, Esq. Expert Witness Real Estate. 480-399-2342. If you are litigating an easement case, Craig Cherney might be able to help you advance and win your case.