At the time of this writing, the field of real estate is experiencing an unprecedented “boom”.
The explosion of the real estate market also means bidding wars, rushed transactions, purchases without inspection, and the like. It’s only a matter of time before real estate disputes are also on the rise. So whether you are on the buyer’s or seller’s side, it is best to take precautions!
The promise to purchase is part of these precautions! As we all know, real estate transactions can happen quickly and promises can be signed without even seeing the house. With that said, what happens when a seller or a buyer refuses to conclude the transaction following the signing of a promise to purchase? Is the buyer’s remorse an acceptable excuse under the law?
The action in passing of the title could be the perfect recourse to force the transaction. Indeed, the promise to purchase is a much more powerful contract than you might know and JuriGo explains how to force compliance!
Promise to purchase: What is the legal implication?
Understanding the offer to purchase that you signed is an essential starting point. Too many buyers, like sellers, underestimate the weight of such an agreement, believing that it is only a form used to express interest in a home. This is off the mark…
An offer to purchase is actually a preliminary contract. In the legal sense, it is a contract entered into for concluding another contract which will be the real agreement between the parties. For the sale of a house, the future contract will obviously be the deed of sale signed in front of the notary. Thus, the promise serves to bind the parties to the essential conditions of the sale while waiting to go before the notary.
Basically, an offer is a unilateral act when, for example, the seller offers his house to the buyer at an “x” price and the buyer agrees to respond to the offer within a reasonable or specified time. This offer is binding only on the seller offering the sale but once the buyer accepts the offer, it becomes bilateral and now obliges both parties to comply with it.
It is also a preliminary contract that can be adjusted to the needs of the parties and can stipulate conditions! For example, the buyer and seller could stipulate that the deed of sale before the notary must be signed within 15 days, and failure thereof could negate the offer. It is also common to stipulate the condition that the offer is only valid if the buyer manages to secure the necessary financing with a lender.
However, remember that signing a promise to purchase does not affect the transfer of ownership! Even when the promise becomes bilateral, the official transfer of ownership does not occur until the deed of sale is signed before the notary. One more reason to provide specific conditions regarding the deadline for transferring the title!
What is action in the passing of the title?
Has the seller received a higher bid after signing the promise to purchase? Or has the buyer changed his mind and no longer wants to buy the house? In either case, we find ourselves in violation of the promise to purchase which constitutes a validly concluded contract. Don’t pass it up if you don’t want to…
This is when the action in passing of the title takes place! This action, in fact, aims to force the execution of a promise to purchase between a buyer and a seller. Either party may initiate the action since they both have an interest in the transaction taking place, whether by force or voluntarily.
You should also be aware that this action is a legal action against the other party to the promise, which will sometimes be impossible to bring if the seller has already disposed of the house.
JuriGo explains all the conditions, steps, and alternatives to action in passing of title.
The steps of an action in the passing of the title with a lawyer!
Since the purpose of the action to pass the title is to force the execution of a major transaction, namely the transfer of ownership of a house, the law requires compliance with a few preliminary steps. Thus, in order to execute this, the following steps must be followed with the assistance of a qualified lawyer:
- Prove the existence of the promise to purchase : This first step may seem obvious but you’d be surprised how difficult it is for some people to prove the promise they made. How is that possible? First, the parties may sign only one copy and, in some cases, only the resisting party will be in possession of that copy.
Then sometimes, promises are made verbally which is even more problematic for evidentiary purposes. However, the promise must be proven, so make sure you have a copy of it when you file the action. - Send a demand letter: The action in passing of the title requires a demand letter to be sent. Any prudent and diligent lawyer will recommend that you send one even if the buyer or seller has clearly indicated his intention not to conclude the sale.
While such an explicit refusal to pass the title could exempt you from the obligation to send a formal notice, caution is in order. It is better to put the contractor in default and require him to pass the title rather than to be slapped on the wrist by the court. - Present a deed of sale: This step is essential to the deed of title. Not only must you present a deed of sale before the court but it must also comply in every respect with the promise to purchase entered into. This document should be drawn up by a competent notary and signed by the party bringing the action in order to prove to the judge his serious intention to conclude the sale.
- Offer and Record of Sale Price: In this fourth step, you must record the agreed sale price in the transaction or demonstrate your ability to pay through proof of mortgage financing. That is how the court checks whether the seller or the buyer, as the case may be, is, in fact, able to pay.
- File the action within a reasonable time: The reasonableness of the time is determined by a set of factors that are specific to the circumstances of the transaction. In particular, consideration will be given to the time lag between the refusal to pass the title by the buyer or seller and the time when the action was brought before the courts.
There may only be five steps to a title action but they are all critical to the success of your suit. It is, therefore, imperative that you begin this process with a qualified real estate lawyer in order to put all the factors in your favor.
Breaking a promise to purchase and claiming damages!
Let us “spill the beans” and spoil the surprise: filing an action in passing of the title becomes moot when the house has been sold ! In fact, although this remedy makes it possible to force the sale of a property, it becomes useless to file a suit when the subject property has been sold to a third party in the meantime.
What solutions remain available to the aggrieved buyer? Damages will be the only possible resort! These damages, moreover, will not seek to enrich the disappointed buyer, nor to punish the seller in default, but to compensate the buyer for the losses suffered by this contractual violation. There is no point in telling you that an action for the transfer of the title represents a much more satisfactory solution for the aggrieved buyer.
What should you do if you suspect that the seller wants to sell the house to another and forsake your promise? If between the signing of the promise and the signing of the deed of sale, you think that the seller wants to sell the house to another party, you can exercise so-called “interim” measures. In particular, an injunction will prevent the sale of the house and cause an action in passing of the title before it is too late.
Can the third-party (buyer) be sued as well? Is the person who took the house you were coveting also responsible for your misfortune? It depends! In fact, if the third party bought the house in good faith, is unaware of the promise to purchase already signed, no action can be brought against him. On the other hand, if he or she acted in bad faith or “colluded” with the seller to breach the promise, he or she may also be liable for damages.
What are the legal remedies of the seller who refuses to close the sale?
A legal remedy is never provided without an adequate line of defense. The action for passing of the title adheres to this principle and that is why the seller has certain means of defense to legally revoke a promise to purchase. There is little room for maneuver but it is, nevertheless, possible for a seller to invoke the following justifications!
The late acceptance of the promise. Where the seller agrees to a period of acceptance by the buyer, the latter must accept it within the prescribed period, otherwise, the promise will lapse. If the acceptance occurred after this period, the seller has a powerful argument to prove that there was never an agreement.
The buyer lied or deceived the seller when signing the promise . The promise may be a “preliminary contract” but it follows the same legal obligations as a validly formed contract. This means that even in the presence of a promise signed by both parties, the seller can get out of it in case of fraud, error, or other defects in consent.
The terms of the promise have not been met. In addition to the acceptance period, the promise may contain other conditions relating to the inspection, the financing, and the date to meet with the n notary. If these conditions are stipulated as being mandatory and the buyer failed to comply, the seller will have one more reason to justify the non-conclusion of the sale.
Are there grounds for the buyer to break a promise to purchase?
The buyer often has more leeway than the seller to get out of a promise to purchase . Since he is now the one who bears the financial risks related to a new home and a mortgage, the terms of the promise are often designed to primarily protect his interests.
In particular, the buyer can invoke the impossibility of obtaining financing. If it is a condition of the promise, the buyer can get out of the contract if he can prove that despite his efforts, he has not managed to obtain the necessary financing. This application process must have been done in good faith!
An unsatisfactory inspection report may also justify the cancellation of the promise. The wording of promises to purchase frequently states that the inspection must be “to the satisfaction of the buyer.” Once the report is submitted, however, there must be sufficient cause revealed by the inspection to justify the cancellation of the promise.
Again, these conditions can only be invoked to break the promise if they are stipulated in the contract! In theory, a promise binds the parties at all costs. Of course, they are free to draft the promise in order to make it conditional which happens very frequently.
The real estate lawyer: an essential ally for an action in passing of the title!
Are you a seller or buyer stressed out because of a promise to purchase that is not being honored?
The next step is for you to hire a lawyer qualified in real estate and contract law. This legal professional will use his or her expertise to maximize your chances of successfully initiating a title action. It all starts with the following professional services!
Analyze the content of the promise to purchase. Offers can contain errors in substance or form which could be detrimental to your rights or those of the other party. It is the role of a real estate lawyer to ensure the validity of the promise.
Attempt to negotiate with the prospective buyer or seller. Before taking a case to court, the first step is to try to resolve the problem amicably which your lawyer will certainly do. By negotiating with the opposing party (or their lawyers), your legal representative will try to enforce the promise without resorting to legal action.
Take action in court in case of refusal! If your co-contractor refuses to comply after the attempts of your lawyer to negotiate out of court, the ultimate remedy will be filing the action in passing of the title. It is during this instance that your lawyer will plead in your favor for the court to order the execution of the promise.
The deed of sale should be drafted by a notary! The presentation of a deed of sale in accordance with the promise is one of the essential stages of the action in passing the title. During a standard real estate transaction, the drafting of a deed of sale must be done by notarial act. It will, therefore, be important to entrust the drafting of the deed of sale to a notary.
File an action in passing of the title with a competent lawyer from JuriGo!
The promise to purchase has the probative force of a contract and it is up to you to enforce its content. As long as the seller has not disposed of the house, the action in the passing of the title remains a possible solution to the breach of a promise. If not, the remedy for collecting damages is still a possibility!
As you can see, the law does not lack solutions for enforcing the rights arising from a promise. Now that you know, why will you delay enforcing your rights with a competent lawyer?
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