Breaches In Real Estate Transactions | Nava Wilson LLP

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An agreement of purchase and sale (“APS”) becomes a binding agreement when both parties sign the agreement and all conditions have either been fulfilled or waived. Once it is a binding agreement, if either party does not complete the transaction, this is considered a breach. A breach of an APS and sale occurs when one party, either the purchaser or the vendor cannot uphold their obligations under the APS.

The most common breach that occurs is when a purchaser is unable to secure the requisite financing to complete the purchase.  At this point, the purchaser will most commonly seek an extension to the closing date and secure the financing. If the vendor does not agree or if an extension will not help them secure the financing, on the closing date when they fail to close, they will be in breach of the APS, and will be held liable for the potential damages that the vendor may suffer.

A purchaser does not have to wait until the closing date to breach the APS, if they advise the sellers prior to the closing date that they will not be completing the transaction, the vendor can hold them in anticipatory breach.

Anticipatory breach occurs when a party by express language or conduct, repudiates their contractual obligations before these obligations are to be completed.

If anticipatory breach occurs, the innocent party, without waiting for the time of the obligation can accept the breach and terminate the APS.  Once this occurs, the innocent party is freed from their obligations under the APS.

Once a purchaser has either breached or is held in anticipatory breach of the APS, the APS is terminated, and the vendor can pursue the remedies available to them. The vendor however does have an obligation to mitigate their damages.


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