In a heated real estate market where blind bidding and unconditional offers are necessary to compete, often times purchasers are vulnerable to pulling the trigger and asking questions afterwards. Conversely sellers are looking to capitalize on market highs and looking to sell for top dollar which often comes down to timing. These competing interests can lead to litigation when a real estate transaction doesn’t go as planned. Here are five common reasons that litigation arises from real estate transactions:
1) Breach of Contract
Litigation often arises because a seller or purchaser has breached the purchase and sale agreement. There are many contractual terms that set out the rights and obligations of the respective parties in a real estate transaction including the closing date, title clearance, deposit requirements, inclusions, exclusions, and conditions.
A Plaintiff commencing suit over a breach of the contract must prove that they have complied with all of their obligations under the contract while the defendant has failed to do so. If successful, a Plaintiff may be entitled to various forms of relief such as damages, specific performance or rescission.
2) Defects and Misrepresentation
Another reason litigation often arises from the purchase of a home is because the purchaser believes that either the seller or the real estate agent has misrepresented, deliberately hidden, or failed to disclose pertinent details about the property which they knew about. Examples can include: mold, faulty or outdated electrical wiring, foundation issues, and unpermitted additions.
There is tension in real estate law between a seller’s disclosure obligations in a sale and the common law principle of Caveat Emptor or “Buyer beware” which places onus on the prospective purchaser to conduct their own due diligence in inspecting the property. In order to compete in a heated market a purchaser may feel compelled to waive their right to inspect the property or other due diligence measures which can result in litigation.
There are various elements that a Plaintiff must establish to be successful in this type of real estate litigation. To learn more check out our page on Latent Defects.
3) Professional Negligence
Sometimes real estate litigation arises because the professionals involved in guiding the purchaser and seller through the transaction have failed to fulfill their professional responsibilities which has resulted in a loss to either the purchaser or the seller.
This type of litigation requires expert evidence to be adduced by the Plaintiff to establish that the professional involved has fallen below the standard of care required of them.
4) Failed or Aborted Transactions
For a variety of reasons, often times one of the parties is not able to complete the sale and this can result in damages to either party. This can be particularly so in a heated real estate market. By example, a seller may lose out on an optimal price they received for the property and be required to sell the property for a lower price due to the initial failed transaction. In such a case, the purchaser who aborted the transaction may be liable to the seller. Conversely if a seller is threatening to abort a sale a purchaser may have legal remedies to force the sale or seek damages.
5) Deposit Disputes
Sometimes a failed or aborted transaction results in a dispute over the deposit. Determining which party is entitled to retain the deposit after a failed transaction depends on various factors. To learn more about rights to the deposit after an aborted sale check out our blog on this topic.
If you are contemplating or facing a lawsuit related to a real estate transaction, it is prudent to contact a lawyer immediately and obtain legal advice. The lawyers at Gilbertson Davis LLP have experience with these types of disputes and can assist you. Contact us for an initial consultation.
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