Breaches of real estate contracts can lead to costly and time-consuming legal disputes and financial losses. Hiring an experienced attorney can give your case an edge and avoid longer legal proceedings, whether you are a buyer or a seller.
At Richman Law Firm PLLC, we have a successful track record handling breach of contract disputes. Our lawyers act as strategic partners, providing preventive legal advice and personalized assistance tailored to your needs. Contact us today for a free consultation.
Material vs. Immaterial Contract Disputes
Regarding contract law, some breaches are considered “material,” while others are deemed “immaterial.” A material breach is a significant violation of a contract term that often provides the aggrieved party with grounds to sue for damages and potentially terminate a contract. For instance, if a seller fails to deliver property ownership by the agreed date, this could constitute a material breach.
On the other hand, an immaterial breach refers to violations that do not fundamentally alter the contract. Yet, they may also entitle the injured party to claim damages. An example could be a delay in completing minor repairs stipulated by the parties in the agreement.
Anticipatory breaches occur when one party provides notice and/or indicates that they will not fulfill contractual obligations before the due date of performance.
The breach is based on an expectation that the other party will not fulfill their obligations in the future.
The party on the other side of the anticipatory breach might be able to terminate the contract and seek damages even though the time for performance has not yet occurred.
Common Seller Breaches
In real estate, a seller breach refers to any failure by the seller to fulfill their obligations as set out in the contract. This could include anything from failing to disclose known defects in the property to failing to provide a clean title to the buyer. These contract disputes can disrupt the transaction and potentially lead to legal action. Below, we cover some of the most common types of seller breaches.
Failure to Disclose Known Property Defects
Sellers are legally obligated to disclose any known defects that could affect the property value or desirability. New York sellers often have to complete a property condition disclosure statement. If a seller intentionally conceals such defects, it constitutes a breach of contract, and the buyer may seek legal remedies.
These defects could range from structural issues, like a faulty foundation or leaky roof, to issues with the property systems, like electrical problems. However, it must be proven that the sellers were aware of specific issues or defects and intentionally chose not to disclose them to the buyer.
Failure to Provide a Clean Title
A clean title, free from liens or other encumbrances, is crucial for a successful real estate transaction.
These could include unpaid taxes, unsatisfied mortgages, judgments against the seller, restrictions, and covenants limiting the use of the property.
Such claims and liens can impact the property value and hinder the buyer’s ability to use and enjoy the property as intended. If a seller fails to provide a clean title at closing, it may be considered a breach of contract.
Failure to Complete Repairs or Improvements
If a contract stipulates that the seller will complete certain repairs or improvements before closing, failure to do so may lead to contract disputes.
These repairs could range from minor cosmetic upgrades to significant structural changes. They may include tasks like fixing a leaky faucet, repainting walls, replacing damaged flooring, or even larger projects like repairing a damaged roof or updating an outdated plumbing system.
In such cases, the buyer may be entitled to compensation or may even opt to cancel the transaction.
Failure to Provide Truthful and Accurate Representations and Warranties
Sellers must provide accurate representations and warranties about the property they intend to sell.
For instance, a seller might warrant that the property’s ventilation and cooling systems are in good working order, that there are no defects, or that the property complies with all relevant zoning laws. If these statements are false or misleading, the seller can be said to have breached the contract.
Common Buyer Breaches
Just as sellers can breach contracts, buyers can also be at fault. Breaches can range from financial missteps, such as failing to provide adequate funds for a deposit, to failing to satisfy pre-closing contingencies. Below are some common ways a buyer might breach a real estate contract.
Failure to Provide Adequate Funds for Deposit
A real estate contract typically requires the buyer to provide a deposit, also known as earnest money, to secure the property.
This deposit is a sign of the buyer’s intent to purchase and is typically held in an escrow account until the sale’s closing. If the buyer fails to provide this deposit in the agreed-upon amount and timeframe, it may constitute a breach of contract.
Failure to Provide Adequate Funds to Complete Transaction
The most fundamental obligation of a buyer is to pay the agreed-upon purchase price at closing. If the buyer cannot provide sufficient funds to complete the transaction, it is considered a breach of contract.
The seller could choose to terminate the contract, leaving the buyer without the property they intended to purchase. The seller could also sue the buyer for specific performance, forcing them to complete the purchase.
Alternatively, the seller may keep the buyer’s deposit as damages in the event of a breach of the agreement. In some cases, the seller may even be able to resell the property to a different buyer and sue the original buyer for any price difference.
Failure to Satisfy Pre-Closing Contingencies
Real estate contracts often include contingencies that must be satisfied before closing. These include securing financing, selling an existing home, or obtaining satisfactory inspection results.
For instance, if a buyer fails to secure a mortgage by the specified date or fails to have the property inspected within the agreed timeframe, it might be legal grounds for breach of contract claims.
Consequences of Breaching a Real Estate Contract
Breaching a real estate contract can have consequences for both parties involved, the extent of which depends on the specific circumstances of the breach. These can range from lawsuits to financial penalties such as forfeiture of deposits and payment of damages.
The potential implications of a breach can significantly impact both parties involved in the transaction.
Legal action is a potential consequence of the alleged breach of a real estate contract. The aggrieved party may file a lawsuit seeking specific performance (forcing the breaching party to fulfill their contractual obligations), monetary damages for financial losses incurred due to the breach, or both.
Depending on the contract terms and the nature of the breach, these could include the forfeiture of deposits, also known as earnest money, or the payment of damages. For example, a buyer who breaches a contract may lose their deposit, while a seller could be liable for damages if the buyer has to rent or buy another property at a higher price.
Contact Us for a Free Consultation
At Richman Law Firm PLLC, we have extensive experience handling breach-of-contract claims in New York real estate litigation. Our contract lawyers work tirelessly to ensure our clients’ swift and favorable outcomes.
Whether you’re dealing with a real estate contract breach, a lease dispute, or a disagreement over a real estate purchase or sale, our goal is to aid in your current dispute and protect your interests in future real estate transactions. Schedule a consultation today.
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Meet Mr. Richman
SCOTT B. RICHMAN, ESQ.
Mr. Richman is the Managing Member and Founder of Richman Law Firm PLLC. In his role as Managing Member, Mr. Richman oversees the day-to-day operations of the firm and handles the litigation of the most complex legal matters across a vast array of practice areas and disciplines.