What Is Specific Performance?

Most real estate transactions proceed smoothly to closing.  However, occasionally a buyer or seller may attempt to back out of the deal without just cause.  For example, a seller may get emotional and not want to leave his long time residence.  Or a buyer may decide that she is paying too much for the house and try to walk away from the contract.  In such cases, the party wishing the transaction to proceed must be ready, willing and able to close, and first invoke time of the essence (https://www.middlesexcountynjrealestateattorney.com/time-of-the-essence/).  If the other party fails to close on the time of the essence date, then the non-breaching party may file a lawsuit against the other party for damages.  If the lawsuit is against the buyer, and there is a contract deposit, then the deposit will be held pending the outcome of the lawsuit to be used to compensate the seller if the seller prevails in the case.

There is another alternative available: specific performance.  This is considered to be an extraordinary remedy available through the New Jersey equity courts when money damages are insufficient to compensate the non-breaching party, in the court’s discretion.  It is said that specific performance will be denied if its application would create a hardship to or impose an injustice on either party.  Also, it may not be granted if there is a change in circumstances.

Where a seller refuses to convey title, the buyer may seek specific performance of the contract to compel the seller to close, so long as the contract is clear and enforceable, and as long as performance is not impossible.  For instance, if it develops that the balances due on mortgages and other liens encumbering the seller’s title exceeds the purchase price, then the seller would be unable to perform and therefore the buyer would be limited to a lawsuit for money damages.

There is a virtual presumption, because of the uniqueness of land and the consequent inadequacy of monetary damages, that specific performance is the buyer’s appropriate remedy for the seller’s breach of the contract to convey.

A seller may seek specific performance against a buyer, but there are caveats.  If for example, the buyer’s contract contains a mortgage financing contingency, and the buyer obtains a mortgage commitment, but then the commitment expires and cannot be reinstated, specific performance will not be granted, on the ground of impossibility.  However, if a buyer has an unexpired mortgage commitment and is able to comply with any stated conditions therein, or if the buyer has agreed to pay cash for the property, then specific performance may be granted.  Again, the seller would need to show that money damages would be an insufficient remedy for the buyer’s breach of contract.

If your real estate transaction crashes and burns, you need to consult an experienced New Jersey real estate litigator to learn your rights and options.  Call us today!

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