Specific Performance of Real Estate Sales Contracts

Most claims for breach of contract involve claims for “monetary damages.” The non-breaching party goes to court demanding a judgment for a dollar amount that would put him in the same position as if the other party had not breached the contract. Real estate agreements of sale are different in this regard however. In that instance, the buyer may ask for “specific performance” of the contract, which is a remedy that is pretty much like it sounds, the seller actually has to perform what it contracted to do – convey the property.

The basis for this remedy rests on two very old legal principles. First, from the moment that the buyer and seller sign the agreement of sale the buyer is the equitable owner and the seller holds the property in trust for the buyer. This technicality allows the buyer to seek equitable relief from a court (that is, relief different from monetary damages.). Second, each parcel of real estate is unique. As one recent judicial opinion explained “no two parcels of land are identical. An award of (monetary) damages will not suffice to allow a plaintiff to acquire the same parcel of land anywhere else.”

These principles were made use of (and the above quote is from) the recent Pennsylvania Superior Court case of Oliver v. Ball. In that case, Mr. Oliver entered into a contract to buy approximately 71 acres of real estate located in Butler County from four members of the Ball family. The Balls breached the agreement. Mr. Oliver filed a complaint asking for specific performance.

Despite the fact that Pennsylvania law necessarily treats a parcel of real estate as unique, at the trial court Mr. Oliver was put through his paces as to why the property was unique and special to him. He testified that the property was of special interest to him because of its size, its subdivision potential, its location near his home and his other properties, its franchise potential rights and its standing timber (because Oliver was at the time in the timber business).
And despite his testimony, the trial court went on to deny Mr. Oliver specific performance. The trial court opinion was quite detailed, stating that Oliver’s testimony did not establish the timber as unique, did not “evidence that gas rights are unavailable elsewhere”, and did not establish that the terrain and location of this particular property was “important to him.” In summary, Oliver did not offer “any evidence that this (P)roperty had any unique characteristics, of import to him, that cannot be found or purchased elsewhere, even within Butler County.”

The Superior Court overruled the trial court decision. It seems fair to say that the Superior Court reasoned that all of the testimony regarding the uniqueness of the property, and whether or not it was of unique interest to the plaintiff, Oliver, was almost beside the point. The Superior Court relied on “the “well-established law that specific performance is available to enforce sales of realty due to land’s inherent nature as unique and therefore impossible of duplication.” The Court stated that “(g)iven that all tracts of land long have been regarded as unique, and appellant further testified to the (p)roperty’s unique characteristics vis-a vis his needs, we agree with (Oliver) that a remedy at law is inadequate . . . and that courts in this Commonwealth must enforce specifically realty agreements breached by sellers, except in cases where hardship or injustice would result.” (Cases where hardship or injustice are enough to avoid specific performance usually involve extreme cases. In one case, an elderly man had given the option for the sale of a home and 16 acres for the purchase price of $550 upon his death. When he eventually passed the property was worth $60,000 and the court, in view of this and other surrounding factors, found it unconscionable to enforce the option.)

Finally, it should be noted that specific enforcement is a buyer’s remedy. A seller contracts to receive money, which obviously can be measured in money damages when the buyer defaults.

Seller beware – don’t sign that paper unless you really plan on selling.

– Rod Fluck

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