Posted By Larry Tolchinsky on November 1, 2016
In Florida, when a seller and a buyer sign a residential real estate contract for the purchase of a new home or condominium, they create legal duties for themselves.
If these duties are not fulfilled, then under the contract there are consequences. Those consequences are spelled out in both the contract and in Florida case law.
For an overview of Florida real estate contracts see, “Anatomy of A Florida Real Estate Closing.”
Breach of Contract Claims
If a seller or buyer fail to comply with the contract, then the non-compliant party has “breached” or “defaulted” on the agreement. That breach normally harms the other side in some way (the seller needs the proceeds from the sale to purchase a new home or the buyer has nowhere to go because they just sold their home and were intending to move into the home that is at the center of the breach).
When a breach occurs, the harmed party may then file a lawsuit for damages, to rescind the deal, or for both. He or she can also sue to force the deal to close. Whether or not the harmed party sues for money or specific performance will depend upon their particular circumstances.
Florida real estate contract lawsuits are filed all of the time here in our part of the state, for all sorts of reasons (Concealment or failing to disclose a bad roof, bad plumbing, septic tank issues, etc.).
For more on the issue of breach of contract, see our post “What Happens When a Buyer Defaults on a Florida Real Estate Contract?”
Can You Protect Yourself From a Lawsuit?
Can you protect yourself from being involved in a real estate contract lawsuit? No. There’s no way to tell when a residential sales contract is signed that it will lead to a complaint being filed at the courthouse.
Sometimes, things become clear pretty fast after the documents are signed. Other times, the deal falls apart on closing day.
Sellers and buyers can default at any point in the closing process. Maybe the seller cannot provide clear title. Maybe the buyer’s financing falls through or a deadline is missed.
There’s no a crystal ball to predict which residential real estate deals are destined for a courtroom. There’s no way to know at what point in the closing process things may fall apart.
That’s why no deal is done until the funds are disbursed and they clear your account.
Types of Florida Real Estate Contract Lawsuits
Here in Florida, real estate contract lawsuits have been based upon a vast array of circumstances. The scenarios are as varied as our climate, culture, and personalities. However, the legal bases for litigation based upon a failed residential real estate agreement are more predictable.
The facts may vary and be unique to the situation, but the law is pretty standardized and established.
Here are different types of disputes that can arise in a Florida real estate contract lawsuit:
1. Effective Date Dispute
One key component of every residential real estate contract is a “meeting of the minds.” Both the seller and the buyer must agree on basic things like the price, the property that is being sold, the date the deal became effective, and the closing date. What controls, the signature or the initials on an accepted counteroffer, when determining the effective date? Within the contract, provisions may impact timing of things, as well. These deadlines may or may not be subject to extension or re-negotiation. If key deadlines are missed, then one party may argue that the deal has been breached and a lawsuit can follow.
For more information, read our posts, “5 Must-Have Prerequisites for A Valid Contract to Sell Residential Real Estate In Florida,” and “5 Key Issues Related to Florida Real Estate Contracts.”
2. Time Is Of The Essence
The contract may contain the phrase, “time is of the essence.” If the party fails to perform a contract duty by the deadline, then the other party can point to the “time is of the essence” language and call off the deal. After that, they can sue or they can re-negotiate the entire sale.
For more information, read our post “Time is of the Essence Provisions in Florida Real Estate Contracts: What Does This Contract Language Mean to You?”
There are all sorts of dates and time frames in a standard residential real estate sales contract. The agreement will have deadlines for things like inspections, mortgage financing approval, and repairs. Things may happen that require these time frames to change. Here, the contract can be changed, or amended, to extend those deadlines. However, if the other party fails to agree to an extension or if an extension is not met or the problem is not resolved, then a dispute may follow.
For more information, read our posts, “What Happens When a Seller Defaults on a Residential Sales Contract in Florida?” and “What Happens When a Seller Defaults on a Florida Residential Real Estate Contract? – Part II.”
4. Title Issues
At closing, the buyer must receive full and clear title to the home or condo from the seller. There may be several reasons that the seller cannot provide it (tax liens, probate issues, boundary disputes, defects in the legal description, and defective documents in the chain of title, etc.). Until the title issues are resolved, and the seller conveys marketable title to the buyer, the closing cannot occur. The seller may be liable for money damages caused by the delay or for the failure to cure the title defects.
For more information, read our posts, “4 Title Issues That Can Derail A Florida Closing” and “3 Types of Title Issues Which Impact Florida Real Estate Closings.”
5. As Is Disputes
In Florida, a seller can offer to sell a home or condo “as is.” That is legal. It means that the buyer is agreeing to take title to the property in its exact condition (without repair), and it is done quite often. However, “as is” does not excuse the seller from all legal responsibility for any problems with the property (a seller can’t simply conceal a known problem that a buyer is unlikely to find during a routine inspection). However, it does mean that the seller does not have to pay for any repairs. What is covered by an “as is” provision may become the subject matter of a Florida real estate contract lawsuit.
For more information, read our post, “Does a Home Buyer Have a Claim Because They Weren’t Told About a Problem with Their Home?”
6. Repair or Property Condition Disputes
Before closing on a home or condo, a buyer should check the condition of the property, and its improvements, to make sure everything is in proper working order. A licensed inspector should check for things like mold, termites, likelihood of flooding, structural support, and other property issues. The contract usually has a deadline for the seller to fix any repairs that are demanded as a result of these inspections. If the seller fails to do the repairs, or does so in a less than acceptable manner, then the buyer may have a claim against the seller for breach. Additionally, if the condition of the property at the time of the walk through is materially different than it was at the time of the inspection, then that may lead to a dispute between the parties.
For more information, read our post, “Major Repairs to Your Florida Condo: Who Pays?” and “4 Conditions A Buyer Should Require Before Closing On A Florida Home.”
Parties may include language in the contract to protect themselves against known or unknown issues. These are called “contingencies.” Common contingencies that buyers may include are those that impact how much they have to pay at closing or if the closing is going to occur at all (short sale approval, appraisal issues, mortgage assumption, attorney approval of the contract, sale of existing home, etc.).
Whether or not that provision applies to the situation may be disputed by the seller, however. Conflicts over contingencies can result in a lawsuit. See, “Florida Residential Closings and Price Changes: Is The Buyer’s Offer Set in Stone?”
8. Cancellation And/Or Rescission
There are circumstances where a Florida buyer can terminate the contract and walk away. For example, if the buyer inspects the property and is not satisfied with the results of the inspection he or she may cancel or rescind the deal. Here, the buyer may point to a problem with the property or simply decide the property isn’t for him or her — no matter what the seller prefers.
Sometimes, the contract will define when rescission applies. Florida law also holds that rescission applies in some situations, even if the contract is silent on the issue (fraud or mistake by one or both parties). The seller may not agree with the buyer who claims rescission and cancels the deal. Whether or not there is a right to cancel or rescind the deal by the buyer may need a judge’s approval, after the seller files his or her case in court.
For more information, read our post “Rescission of a Residential Real Estate Contract in Florida.”
How Do Florida Real Estate Lawyers Help?
Having an attorney to help with a Florida residential real estate agreement before it is signed and it creates legal duties is a best practice. However, a Florida real estate lawyer can be helpful at any point during the closing process, especially if the deal is in danger due to the failure of a party to comply with the contract.
Dispute Resolution or Trial
Depending upon the documentation, the parties may enter into “alternative dispute resolution,” or they may take their grievance directly to the courthouse and file a lawsuit. Many form sales contracts in Florida will have provisions for arbitration or mediation between the parties before a formal lawsuit can be filed.
Here is an example of a form residential sales contract’s mediation provision:
However, the claims and their resulting damages will be the same. If you are required to go through alternative dispute resolution, this will not change the nature of your claim. It just defines where your battle will be fought.
If you or a family member are purchasing or selling real estate in Florida, and you have a dispute with the buyer or seller, a good piece of advice is to talk with an experienced Florida real estate lawyer. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions about a potential lawsuit.
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