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Real Estate Litigation, Purchase & Sales Agreements

Posted by Gene D. Lipscher | Nov 04, 2018 | 0 Comments

Purchase and Sales Agreements

1. Enforcement of Real Estate Contracts

In order for a real estate contract to be enforceable, Florida law requires that the contract be in writing as well as signed by the party to be charged. For example, a buyer seeking to enforce a real estate contract against a seller of property must have a written contract signed by that seller. Under limited circumstances, an oral contract for the purchase and sale of property may be enforceable upon a clear showing that (1) the buyer has paid all or part of the consideration for the property, (2) the buyer has possession, (3) valuable and permanent improvements have been made by the buyer and (4) facts exist which would make the transaction a fraud on the buyer if the contract is not enforced.

2. Remedies Available for Breach

Assuming that the real estate contract is enforceable, Florida law provides a buyer with different legal and equitable remedies. The buyer may sue the seller for damages incurred as a result of the breach of contract or, alternatively, may seek the remedy of specific performance. In an action for specific performance, the buyer is asking the court to make the seller specifically perform its contractual obligations to sell the buyer the property.


On the flip side, a seller has two alternative remedies available when there is no controlling liquidated damages provision. The seller may either retain the property and sue for damages (which is the difference between the contracted purchase price and the fair market value of the property at the time of breach, less any money already paid by the buyer) or, in appropriate circumstances, sue to compel specific performance by transferring the property and recovering the purchase price plus any incidental damages. Usually, the seller does not seek specific performance since the buyer's breach usually relates to the buyer's financial instability. Accordingly, while the court can order the buyer to purchase the property, if the buyer does not have the money to pay the seller, this particular remedy is without teeth.


What about a liquidated damage provision in the real estate contract? As can be imagined, if one of the parties breaches the real estate contract, there is no way of knowing what the actual damage would be as there are too many variables at play. For instance, if the buyer decides after entering the contract that he does not want to purchase the property after all, the seller may have to attempt to put the house back on the market. Maybe the house sells immediately but then again, the market may have gone soft and perhaps it take another year to sell the house again. So, when entering into the real estate contract, the parties may attempt to approximate the damage that would be suffered upon a breach and thus, limit their respective remedies and potential exposure to liability. A liquidated damage provision is a stipulation in advance as to an amount to be paid or retained as liquidated damages in the event a breach of the contract occurs. Not only must the liquidated sum be reasonable, but the actual damages at the time of contracting must be uncertain. Moreover, if the liquidated provision is determined to be more of a penalty as opposed to a fair approximation of the damages to be incurred, the courts will not enforce the liquidated damage provision.

The liquidated damage provision will also not be enforceable if it gives the seller the choice of keeping the buyer's deposit or suing for damages. Such a provision penalizes the buyer since it exposes the buyer to damages in excess of the liquidated amount should the seller choose to pursue this remedy. Likewise, a liquidated damages provision that limits a buyer's remedy to a return of the security deposit, while at the same time providing the seller with a choice of remedies, is also unenforceable.


3. Residential Seller's Duty to Disclose

Florida law requires that where the seller of a residential home (or his/her real estate broker) knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller or the broker is under a duty to disclose them to the buyer. This duty is equally applicable to all forms of real property, new and used.

Many people believe that an “as-is” provision or addendum to a contract relieves them of the duty to disclose material facts affecting the value of the property. That is not the case. The disclosure requirements cannot be contracted away by the simple use of an “as-is” provision in the contract.

4. Obligations of Residential Buyer to Discover Defects

Although the seller has a obligation to disclose known material facts affecting the value of the property, the buyer is required to take reasonable steps to discover ascertainable material facts relating the property. Thus, if the material facts affecting the value of the property could have reasonably been discovered by the buyer, then the buyer may not be entitled to sue the seller for non-disclosure.

5. Commercial Property

The disclosure duty imposed upon a seller of residential property does not apply in the commercial context. Thus, where a seller of commercial property makes no representations about the property, the buyer is on his/her own. However, if the seller makes any affirmative misrepresentations or engages in active concealment, then that seller may be liable to the buyer.

About the Author

Gene D. Lipscher

Gene D. Lipscher, P.A. has represented business clients that serve in a variety of industries, such as: Business & Commercial Litigation Business Transactions Business Formations Contract Disputes & Litigation Construction Litigation Collections Real Estate Litigation Maritime Litigatio...


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