Many people might assume real estate contracts are fairly straightforward, especially if their only experience is a lease or purchase agreement for residential real estate. However, real estate contracts can be complex and generally involve many contingencies that allow the buyer or seller to legally back out of the transaction. This can make it more difficult to determine when a breach of the contract has been committed and the appropriate damages that should be awarded to the aggrieved party.
Real estate transactions and contracts are one area of the law where the appropriate award can be specific performance on the contract, instead of a monetary award for damages. Here is what you need to know about specific performance and when it applies in Arizona.
What is Specific Performance?
Specific performance is the legal enforcement of a contract, typically after one party has breached the agreement. For example, a seller of a property executes a purchase agreement with a buyer and then decides they do not want to sell the property shortly thereafter. This could be for any variety of reasons, but it is likely in breach of the agreement they have made with the buyer. In many cases, courts would typically favor monetary damages for breach of an agreement.
Real estate contracts can be viewed differently by Arizona courts if the seller is proven in breach and the buyer still wants to complete the transaction. In these types of cases, Arizona courts have shown the breaching party can be forced into specific performance of the contract and completion of the transaction, meaning that the court forces the sale to go through even when the seller no longer wants to sell the property
Arizona Statute of Frauds
The Arizona Statute of Frauds details that no legal action can be brought before the courts for real estate transactions unless the agreement is in writing and signed by the party to be charged. Simply put, this means the breaching party must have executed an agreement which details the contract stipulations being breached if the aggrieved party wishes to pursue specific performance in Arizona.
The most important aspect of the Statute of Frauds and specific performance for anyone to understand as they approach potential real estate transactions is to get your agreements detailed in writing. Do not allow important terms or conditions of the agreement to be verbal or “handshake” deals. Working with experienced real estate professionals and attorneys will help you make sure that your real estate contracts are enforceable and protect your interests in the transaction.
When Does Specific Performance Apply in Arizona?
Since specific performance is not the common or default remedy for breach of contract in Arizona, the application of it will always depend on the situation, agreement and nature of the breach. The court must determine a monetary award will not suffice and the breaching party must be forced to perform on some or all of the contract.
To understand the complexities involved in arriving at a determination of specific performance, someone only needs to understand that real estate ownership can be complicated by partners, easements, type of deed and more. It is not uncommon for a property owner to execute a contract and afterwards find out there are restrictions on their planned sale.
Steps to Pursue Specific Performance
If you are involved in a real estate transaction and the other party has breached the agreement, the most important step is working with an experienced real estate attorney to review the matter. Since specific performance is not the typical remedy for breach of contract, you will need to make a detailed and persuasive claim to the court that only specific performance of the contract will repair the damages caused by the breaching party. This is generally not as simple as saying the seller will not sell a property under contract. You will need to provide evidence of the written agreement, the details of the breach, and the harm caused to you from the failure to honor that agreement.
The second important step when pursuing specific performance on a real estate contract is typically filing a lis pendens with the county record to prevent the property from being sold to another party until the lawsuit is resolved. One of the most common reasons for a seller to suddenly want to back out of an agreement to sell their property is when another buyer makes them a better offer.
Handling this process correctly is another reason to work with an experienced real estate attorney in Arizona. This filing helps protect your interest in the property and gives you a legal avenue to specific performance on the contract, even if the seller manages to sell the property to someone else.
Find an Attorney for Specific Performance in Arizona
Real estate transactions can quickly become complicated and frustrating for those not experienced in the process. It is tempting to become contentious when someone fails to hold up their end of an agreement and leaves you wondering what happened. The most important thing to understand is there are appropriate legal remedies available in Arizona.
The attorneys at MacQueen & Gottlieb routinely work with real estate owners, investors, and developers to make sure their contracts are enforceable and vigorously pursue appropriate remedies when the counter party breaches those agreements. Contact us today at 602-562-7218 to schedule an initial consultation or make an appointment online here.