A real estate purchase agreement or contract of sale is a binding contract if it has been signed by the seller and the buyer and if the buyer has given the seller a deposit. The parties are obligated to meet the terms and conditions of the contract and to take the actions that they agreed to take in the contract. If either party fails to perform under the contract, the other party can obtain certain kinds of relief, called remedies. One remedy, called specific performance, requires the defaulting party to complete the contract.

Buyer's Remedy of Specific Performance

Specific performance is a form of relief requiring the party who breached or defaulted on the contract to fulfill the terms of the contract. If the seller is able to perform his agreements in the contract, but is unwilling to do so, the buyer may bring a lawsuit for specific performance. The courts generally recognize that each parcel of land is unique and that a monetary award would be inadequate and will order the seller to convey the property to the buyer, according to the terms of the contract.

A buyer may also obtain specific performance from the seller when the seller can't convey all of the property covered by the contract, such as when the parcel owned is smaller in area than that agreed to be sold, or when additional defects in title are uncovered. The seller may be compelled to perform to the extent possible, with an abatement (reduction) of the purchase price to compensate for the defect or deficiency. The amount of the abatement is usually equivalent to the value of the property not conveyed.

When a lawsuit is brought for specific performance of a contract to convey real property, the plaintiff (the person bringing the suit) may file a notice of pendency to prevent any transfer of the property to a third person until resolution of the claim. The notice is sometimes called a notice of lis pendens, and it is usually filed in the recorder of deed's office. The effect of filing this type of notice is that the seller won't be able sell the property to another buyer while the lawsuit is pending.

To obtain specific performance, the buyer must show that he or she was ready and able to perform at the closing.

Seller's Remedy of Specific Performance

A seller of real property may file a lawsuit against a defaulting buyer for specific performance of the sales contract. The relief actually obtained by the seller in this kind of lawsuit is the recovery of money because the court can only enter a judgment requiring the payment of the purchase price amount.

A seller who retains the buyer's down payment can still sue for specific performance. However, if the contract provides for a specific, exclusive remedy in the event of the buyer's breach, the seller is precluded from bringing a lawsuit for the purchase price. For example, in some states, the buyer's deposit is considered earnest money, which suggests an agreement of liquidated damages in the event of a breach of the sales contract, and specific performance can't be ordered.

Specific performance is granted at the court's discretion. The court will only grant such relief if there is a valid contract between the parties and if the buyer has signed the contract. Moreover, all of the conditions of the contract applying to the seller must have been performed. The seller must be ready, willing and able to comply with the contract, by being prepared to convey to the buyer marketable title (which means no defects in the title being conveyed) to the quantity of land that he contracted to sell.

If you have any questions on the remedy of specific performance, contact a real estate attorney in your area.

Questions for Your Attorney

  • Can I obtain specific performance if the seller refuses to go through with a real estate purchase agreement? How difficult is the process?
  • What does a seller of real estate get if he is successful in his lawsuit for specific performance against the buyer?

Tagged as: Real Estate, Residential Real Estate, contract enforcement, sales contract