In residential real estate transactions, a buyer or a seller may occasionally breach the real estate contract. Real estate transactions are often complex, with timelines, obligations, and performance requirements. Each party who executes a real estate contract contractually promises to perform their part of the contract. Failure to perform constitutes a material breach of the contract, allowing for the parties to pursue remedies against the party who fails to perform pursuant to the contract.
What is a “Material Breach”?
A material breach of a contract occurs when a party to the contract fails to perform. For example, a buyer or seller may materially breach a real estate contract if the buyer has a change of mind and refuses to proceed with the contract.
Examples of a buyer breach include:
- Failing to make the deposits pursuant to the contract.
- Failing to obtain insurance as required.
- Failing to proceed with the closing.
- Inability or unwillingness to close.
- Failing to apply for financing in the prescribed time periods.
Examples of a seller breach include:
- Change of mind and refusal to proceed with the contract.
- Not allowing the buyer access to do inspections, appraisals, and other contract requirements in order to proceed with the contract.
- Not showing up to closing.
Once there is a material breach of the residential real estate contract, then either the buyer or seller may seek legal or equitable remedies such as filing a suit to get ones deposit back for or asking a court to enforce the agreement.
Potential Remedies when a Material Breach occurs:
Specific Performance: If a seller breaches the party can pursue a remedy in equity called specific performance. This legal action can compel the seller to proceed with the sale at the contract price. A lawsuit seeking specific performance is usually expensive and may take some time in court before a ruling is rendered.
Monetary Damages: Buyers may seek the return of their escrow deposit along with reimbursement for expenses incurred due to the seller’s breach. These costs can include legal fees, appraisal charges, survey costs inspection fees, and other closing costs.
It is important to note that the real estate contract typically has language that provides monetary remedies in the event of a material breach. Many contracts may contain a provision known as liquidated damages which is an agreed upon amount indicating what the parties will accept as damages in the event that one party breaches the contract.
There are provisions within the Florida residential real estate contract that involve providing notice of the default, an opportunity for the defaulting party to cure a default, and other terms that affect the parties. It is important to understand the terms of the Florida real estate contract so that you know what to expect and what can happen. Contacting a Florida real estate attorney to guide you through the real estate transaction will help you navigate the real estate process.