Your Rights and Repercussions During a Real Estate Breach of Contract

Recently, a young couple in Naples, Florida, entered into a contract to buy their first home. They put down $3,000 worth of earnest money. A purchase contract was drawn up. One of the contract’s contingencies was that the final date of sale would be on a date prior to the young couple’s end date on their apartment lease.

Two weeks before the closing, the sellers told the buyer they would have to extend the closing date due to moving complications. The seller was then in breach of contract and the buyers were in danger of not having a home to live in.

All too often, there are three different parts of a real estate contract that directly address each party’s responsibilities in the contract of sale. Terms or conditions for the seller, for example, might be the replacement of a roof when selling a residential home before the sale is complete.

Contingency for the buyer, might mean that financing must be acquired before the sale is complete. In both of these examples, if either party does not meet the agreed upon term or condition, they may be in breach of contract.

Normally within a real estate contract there is also a dispute resolution outlined, so that when a potential breach of contract arises, there is already a way to handle the dispute without going to court.


Potential Breach #1: Terms and Conditions

In general, purchase agreements in real estate have pages upon pages of terms and conditions that each party, buyer and seller, must agree to. Examples of these terms and conditions include:

  • An agreed upon purchase price
  • Address of the property
  • Legal description of the property
  • Date of final sale
  • Date the buyer will take possession
  • Items included in the sale: Carpet, appliances, light fixtures, etc.
  • Items not included in the sale: Patio furniture, chandelier, etc.
  • A clear title is provided by the seller
  • The seller is obligated to pay for house related expenses through the closing date
    • Gas
    • Electric
    • taxes

If, for example, the seller decides he or she wants to take the appliances with them, the seller is in breach of contract. The buyer then has the ability to cancel the sale, or if they still want the property, they can agree to modify the price based on the value of the appliances.

If the seller will not modify, then the buyer can use the dispute resolution clause to settle the breach of contract by the seller.


Potential Breach #2: Contingencies

In real estate contracts, both buyers and sellers add contingencies to the sale agreement to protect their own interests. Some of these contingencies are:

  • The buyer will have a home inspector come in to inspect the property and all negative findings must be resolved before final sale.
  • The buyer must obtain financing
  • The buyer successfully sells his or her current property
  • The seller successfully buys a new property

Buyers generally put down earnest money in the beginning of buying a home or property. In the event that any of the contingencies are not met, the buyer is returned his or her earnest money and the contract is null and void.

If there is a disagreement on whether or not the contingencies have all been satisfactorily met, then the parties must turn to the dispute resolution clause of their agreement.


Breach of Real Estate Contract Resolution

The dispute resolution part of a real estate contract outlines how the parties agree to resolve any claims there has been a breach of the real estate contract. The three ways most often used are:

Contract Resolution #1: Arbitration

This uses an agreed upon third party, not an officer of the court, who both sides will submit evidence to, and then the “arbitrator” will make a decision on the matter. In binding arbitration, both parties are legally obligated to the arbitrator’s decision and may not be able to seek further legal action.

Contract Resolution #2: Mediation

Both parties will meet with a mediator who will help them find a solution to the dispute. If a solution cannot be found and agreed upon in mediation, the matter will then have to be taken to court. 

Contract Resolution #3: Small Claims Court

In most states, each county has a small claims court. These courts will generally hear disputes about matters under a set amount. In Lee County, Florida, the set amount for small claims court is under $5,000. In Charlotte County, Florida the set amount is also under $5,000, as is the set amount for Collier County, Florida.

When entering into a real estate contract, having an experienced lawyer there to help guide you through the process is essential. Should problems arise, and a breach of contract occur, you want an attorney with experience in contract and real estate law on your side. Lusk, Drasites & Tolisano are proud to serve Southwest Florida’s real estate and contract law needs, call us today to find out how we can help you in your real estate purchase.


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