When both parties sign a California purchase agreement for a residential property, commercial building, or land parcel in Ukiah or elsewhere in Mendocino County, they are entering a legally binding contract. If a buyer or seller fails to honor the agreed terms or walks away without a legal basis, it creates a breach of contract that can derail the transaction and result in real financial harm.
What constitutes a breach?
A breach occurs when one party fails to perform a required duty without a legal excuse. In California real estate deals, breaches typically fall into two categories.
Seller breaches include refusing to close after all contingencies have been satisfied, failing to deliver clear marketable title, and misrepresenting or concealing known material defects in violation of California disclosure requirements.
Buyer breaches include failing to deposit earnest money into escrow on time, defaulting on the contract because of loan denial after the loan contingency has expired, and walking away from escrow without cause after all contractual contingencies have been satisfied or formally waived in writing.
The role of contingencies
Not every failed transaction is a legally actionable breach. Standard California Association of Realtors purchase agreements include contingency clauses that allow parties to cancel lawfully under specific circumstances. Common contingencies include an inspection contingency that allows the buyer to request repairs or cancel after discovering significant defects, an appraisal contingency that protects the buyer if the property appraises below the purchase price, and a financing contingency that allows cancellation if mortgage approval falls through within the specified window. When a party cancels after removing contingencies in writing, or allows deadlines to lapse without proper written notice, the cancellation constitutes a breach.
Legal remedies available to buyers
Real estate is presumed unique, which supports an action for specific performance when a seller breaches. A buyer can petition the court for an order compelling the seller to complete the sale and transfer title. Buyers can also seek monetary damages for out-of-pocket costs, escrow fees, and the difference between the contract price and the property’s market value at the time of breach. Filing a Lis Pendens places a cloud on the property’s title, preventing the seller from selling to another buyer while litigation is pending.
Legal remedies available to sellers
Most California purchase agreements contain a liquidated damages clause. For residential properties of one to four units, a buyer’s breach generally allows the seller to retain the earnest money deposit, capped at 3% of the purchase price, as full compensation. If the contract lacks an enforceable liquidated damages clause, the seller may pursue actual damages measured by the difference between the contract price and the lower market value at the time of breach.
Getting legal guidance
Real estate disputes involve strict notice requirements, mandatory mediation prerequisites, and tight deadlines. If you are dealing with a contract breach or another real estate dispute, contact a real estate litigation attorney in Ukiah about your options.