What Is a Breach of Contract in Real Estate?

A real contract outlines several terms and conditions that must be followed for it to be considered valid. A breach of contract happens when one of the parties to the contract whether verbally or written fails to adhere to the terms outlined in the contract.

There are many instances of breach of real estate contracts but most of them relate to real estate purchase agreements. Breaches can also be related to residential or commercial property usage or in the rental agreement, a breach in the terms of the lease breaches in land usage or boundary agreements.

As we've stated above, most contract breaches in real estate are related to real estate transactions. Because they involve financial transactions, it's a requirement that they must be in writing and signed to comply with the Statute of Frauds.

All contracts are drafted by the local Realtor’s Association and contain essential terms which differ from county to county or state to state. Here are the general terms that you’re likely to come across in a real estate contract:

• Property purchase price
• Property’s good faith deposit
• Property funding
• Address of the property
• Number of days before the sale is finalized
• Items included in the sale
• Items excluded in the sale
• Individuals responsible for taxes and other expenses such as warranties

There are many instances in which a breach of contract in real estate can occur. They include:

• Missing the indicated day to pay
• Failure to deliver the deed of contract in the recommended method
• Failure by a landlord to comply with the implied warranty of habitability which applies in landlord/tenant law
• Unauthorized leasing of commercial, residential property, and land

If either or both parties fail to comply with the terms and conditions that are outlined in the contract, this is referred to as a breach of contract. Most purchase contracts outline alternative methods of dispute resolution such as mediation. However, such methods only apply if the parties involved agree to sign particular clauses. If the parties don’t agree to use alternative conflict resolution methods, then the remedy depends on whether the breaching party is a buyer or seller.

If the non-breaching party is the seller, possible solutions are suing the seller for damages, terminating the contract, and requesting they pay back the good-faith deposit. The seller may also be required to pay reasonable expenses to the extent specified by the contract.

If the non-breaching party is a seller, the seller can opt to retain the good-faith deposit, terminate the contract with the buyer, sue the buyer for money damages, and sue for specific performance i.e. make the buyer perform according to the terms of the contract.

There are several remedies for other real estate breaches of contract case in point a landlord accusing a tenant depending on the circumstances and facts of that particular case. The general rule of thumb is that the breaching party can sue the breaching party for money damages and file for a suit for specific performance which makes the breaching party conform to the terms outlined in the contract.

As with all contracts, one of the most effective methods of avoiding a dispute is to have a comprehensive agreement that outlines how the parties should conduct themselves. It should also highlight ways of resolving conflict among the parties.

Real estate sales involve a lot of activities that may cause challenges. In such a case, it's important to include a contingency clause to avert a breach of contract.