specific performance clause

Gottlieb Law - Understanding Specific Performance in Real Estate Contracts

Understanding Specific Performance in Real Estate Contracts: What Home Buyers Need to Know

Understanding Specific Performance in Real Estate Contracts: What Home Buyers Need to Know 2453 1635 Gottlieb Law

Sometimes, real estate transactions do not go as planned. This is why ensuring that all parties uphold their end of the bargain is crucial for a successful deal. For certain, there will always be instances, even when unintended,  where one party fails to fulfill their obligations as outlined in the contract. This is where the concept of specific performance comes into play as a legal remedy to address breaches in real estate contracts. In this comprehensive guide, we will explore the ins and outs of specific performance in real estate contracts and its significance in ensuring fair and just outcomes.

Understanding What Specific Performance Implies

To clarify, specific performance is a legal remedy which is used when a circumstance arises where a court orders the breaching party to perform their contractual obligations. In other words, the court mandates that both parties continue with the contract as if the breach had never occurred.

This remedy is often sought when monetary compensation alone would not be sufficient to remedy the breach, making it especially relevant in real estate transactions where unique properties and opportunities are involved, or when the breach is a substantial detriment to the other party.

For example, if a seller were under contract with a buyer and then decided they no longer wanted to sell the property, this would be a breach of contract. This can leave the aggrieved party at a significant disadvantage, especially if they were relying on the completion of the deal for their own plans. Using the same example, the buyer may have already sold their residential property and no longer have a place to live.

Specific performance becomes invaluable in cases where the property or circumstances are truly one-of-a-kind, or when no amount of monetary compensation could adequately compensate the injured party for the loss suffered. 

How Specific Performance Works in Arizona

In Arizona, as in most states, specific performance aims to compel the breaching party to perform their obligations as specified in the contract, rather than awarding monetary damages. 

It’s worth noting A.R.S. §12-546 states there is a four-year window in which to commence an action for specific performance. However, aggrieved parties may wish to pursue this type of claim, as it is possible that an Arizona court might force the breaching party to perform on his or her contractual obligations.   

Specific performance is not automatically granted in every breach of contract case. The court exercises its discretion in deciding whether to enforce specific performance. In most cases, specific performance will take into account things like the property, its uniqueness, whether or not it’s feasible to enforce the measure and any possible defenses. 

In some cases, monetary damages might be sought as an alternative to specific performance. However, the injured party may find that monetary compensation does not adequately address their unique circumstances. Another possible outcome is called rescission. When this occurs, it involves canceling the contract and returning both parties to their original positions. While rescission can be an option, it should be noted that specific performance allows the deal to proceed as planned, which may be preferable to the aggrieved party. 

How Courts Handle Specific Performance Cases

Certain conditions must be met for specific performance to be considered by the court. To begin with, the party that brings the civil action must first demonstrate that the contract is indeed valid and that they’ve met any obligations to it on their part. Further, they must also show that the other party has failed to honor their obligations, effectively breaching the contract. 

What’s more, they must also show specific performance is an appropriate and feasible remedy in the given circumstances.

Knowing courts exercise discretion when it comes to ordering specific performance, the unique nature of each case requires careful consideration of the circumstances. The court will weigh the equities of the situation and assess whether enforcing specific performance is fair and just in the given scenario.

Situations Where Specific Performance May Not Be Granted

While specific performance is a powerful remedy, it’s not without its challenges and limitations. For instance, if the breaching party no longer owns the property or if the performance is practically impossible, the court may deny the request for specific performance. Additionally, the court may consider the practicality of enforcing the remedy, especially if it would create an undue burden on the breaching party.

Specific performance may also be denied in cases where the breaching party can successfully raise legal defenses, such as the contract being unconscionable, the injured party having unclean hands or the contract being based on mutual mistake. Furthermore, if the court determines that the remedy would be inequitable or impractical, it may refuse to enforce specific performance.

Consult an Experienced Real Estate Attorney

It is important to note that specific performance cases can be complex and may involve legal challenges. Consulting with a qualified real estate attorney in Arizona is crucial for parties seeking specific performance or defending against a specific performance claim. Laws can evolve, and court interpretations may vary, so it’s always advisable to consult with legal professionals who have up-to-date knowledge of Arizona’s specific performance laws and regulations. Contact us today at 602-899-8188 to schedule an initial consultation or make an appointment online.