One issue that commonly arises in connection with real estate purchase and sale agreements involves alleged failures to disclose. If you are selling a property and fail to disclose known, material defects, the buyer could have a claim for damages. Lawsuits frequently arise from this situation. It is most common in residential sales and the duty to disclose laws applicable to residential sales are generally stricter than those in commercial cases. Now, the seller of a residential property is not required to go into every nook and cranny of the property looking for defects. Generally, the law is concerned with defects that you’ve been made aware of or can see from a reasonable visual inspection. Other than that, it’s the buyer’s responsibility to perform their own investigations to make sure there aren’t issues with the plumbing, electrical, roof, etc.

Another issue we see in real estate disputes are issues with the purchase contract. We had a client who was trying to sell a multi-family property and had his real estate agent draft the contract and they didn’t do a competent job. Specifically, there were several vague and unclear terms and, once a dispute arose, it was not clear what each party’s rights were under the contract. This often leads to disputes that wind up in court or arbitration.

Also, people usually act in their own interests, even if it means they’re violating a term of the contract. This often arises when people don’t know what they signed or just didn’t bother to read or understand the contract terms. Consequently, they are surprised by something and refuse to perform. The point is to always read the contract, even if you don’t think it’s important. Or, even better, hire an experienced lawyer to take the guesswork and surprises out of your real estate and business contracts.

Additional issues between owners can often lead to disputes, especially in divorce or multi-shareholder situations. When spouses decide to split during the term of a contract or disputes arise between the shareholders of an LLC or corporation, it can cause deals to fall apart since their interests are no longer aligned and lead to litigation or arbitration.

One last issue to touch on are deposit disputes. Deposit disputes are very common in real estate contracts. If you are the buyer, you usually put down a deposit when you sign a purchase contract and the contract should provide how the deposit is to be handled. If everything goes well, the deposit is generally applied to the purchase price at the close of escrow. However, if the buyer fails to perform, the contract should address under what circumstances the deposit might be forfeited to the seller. A poorly drafted deposit provision can result in litigation. Therefore, make sure you know your contract.

If disputes do arise, a non-breaching party must weigh the costs versus the benefits of taking the breaching party to court. When clients approach us in these situations, we often recommend that a client not pursue the matter in court or arbitration. Sometimes, it’s just best to walk away, avoid spending a year or two in litigation, and find another deal to do or property to buy. Our firm’s job in this situation is to analyze our clients’ case, their appetite for risk and wherewithal to fund a legal fight, and then advise on what we think they should do. Ultimately, it’s up to the client and some want to sue no matter what.

For more information on Issues in Real Estate Purchase And Sale Agreements, a consultation is your next best step. Get the information and legal answers you are seeking by calling (714) 594-6322 today.

Art Matthews

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