Specific Performance

Developer Sues Seller for Specific Performance

A Developer makes an offer on vacant property that has the potential to be
subdivided, and he makes a written offer that is accepted. Of course, he has
contingencies, including a contingency that he be able to obtain city approval for
his short plat.

Long story short, he does his due diligence, his engineering, and all the work
involved in getting the plat submitted and dealing with the city's requirements
and mitigation. The final plat is approved but not recorded, because the Seller
does not give the engineer the recording fee for the final plat.

The closing date comes and goes. The Developer is getting nervous and
wanting to close. He keeps getting excuses as to why closing cannot happen,
but they are through his agent who is also a dual agent representing the Sellers,
so as often is the case in these cases, there is some confusion over time about
who said what and who did what and whose fault it is that the transaction hasn't
closed. By the way, since the Purchase & Sale Agreement was signed, property
values have gone up substantially. The point here being that the Sellers could
make a lot more money if they could get out of this contract and re-sell the
property.

Finally, Developer runs out of patience and retains his attorney (me). We
commence a suit for Specific Performance, which demands that the Sellers close
the transaction per the terms of the contract.

And what pray tell do you suppose the defenses are? Get ready, because these
are the standard defenses lawyers often use, regardless of the facts. That's my
observation after almost 20 years of practicing real estate law. Here are the
defenses and counterclaims:

That it was not the Seller's fault the final plat wasn't approved in a timely
fashion;
That the contract is no longer valid, because the closing date was not met;
That the legal description is not sufficient and that makes the contract
unenforceable;
And, they added a third party defendant, the dual agent, claiming that he
had breached his fiduciary duties to them and that he violated dual
agency law.

The truth was that the Sellers simply had delayed recording the final plat, and
neither the Buyer Developer nor the agent had anything to do with that delay.
The other truth was that the legal description was sufficient, but they were
involved in lying in order to build a better case for themselves. The legal
description was on an attached exhibit, a copy of the Statutory Warranty Deed.
The legal description doesn't get any better than that. The SWD as attached
was referenced in the first page of the Purchase & Sale Agreement by direct
reference and by tax parcel number. The tax parcel number was handwritten on
the attached SWD, and Buyers and Sellers all initialled and dated (including
spouses) the SWD in the margin by the legal description. So what did the
Sellers argue? They boldly argued that the SWD was not attached. They
admitted the initials on the SWD were theirs, but they insisted it was not
attached. The Seller states it was, the agent states it was (all under oath), and
even better the escrow company had documents showing the SWD with the legal
was attached to the Purchase & Sale Agreement.

Why did the Sellers bring in third party defendants, including the agent and his
broker? Because their errors and omissions insurance was the deep pocket.
And because the Seller's attorney knew, as I did, that insurance companies
prefer writing big checks more than going to court.

At the mandatory pre-trial settlement conference, we do end up settling the
whole case in my client's favor. As the Buyer Developer, he closed on the
property at the original contract price, but he did end up paying my attorney's
fees. A little luck played in this Developer's favor, because the value of the real
estate appreciated by about three times the attorney's fees of $24,000.

How much did the real estate broker's insurance company pay the Sellers to
settle the case? It was an amount almost three times my attorney's fees, and get
ready for this: that exact amount was the Seller's total attorney's fees. In other
words, the Sellers sold the property to the Developer on the contract terms, and
the broker's insurance company paid all the Seller's attorney's fees. So who
really made out in this litigation that lasted over a year? I would suggest the
Seller's attorneys made out extremely well.

This is a true story. I know, because I was the attorney representing the
developer. I have not included names, because I believe everyone would prefer
to remain anonymous. Chuck Marunde, J.D.