For a real estate purchaser, it can be disappointing, frustrating, and even deeply problematic when a seller tries to back out of their signed sales agreement and breaks their promise to convey the property according to the contract’s terms. Sometimes, monetary damages are enough for a buyer to move on and seek another property. In other situations, however, completing the agreed-upon transaction is the only way the buyer can make themselves whole.
In New Jersey, courts have the power to order “specific performance” of a real estate contract. Specific performance is an equitable remedy that compels a party to perform their contractual obligations rather than paying damages for breach. In the context of a real estate contract, that typically means a court orders the breaching party to convey (or accept) the property as promised.
Because each parcel of real estate is unique and a buyer may have already taken irreversible steps in reliance on the seller’s promises, New Jersey courts often consider specific performance an appropriate and equitable remedy when a seller wrongfully refuses to close. But that potent remedy isn’t always available. For a judge to force a putative seller to complete a deal against their will, a buyer seeking enforcement must prove, among other things, that equity and fairness favor enforcing the contract as written.
When New Jersey Courts Will Grant Specific Performance
New Jersey courts have long recognized that real property is not fungible and no two parcels are alike, and that an award of money damages may not adequately substitute for the loss of a particular property interest. That fact alone, however, is usually insufficient to support specific performance. Instead, a buyer needs to demonstrate the following if their claim is to succeed:
- A valid and enforceable contract to sell the property exists, supported by consideration, executed by both parties, and containing all essential terms (e.g., sales price, property description, closing date).
- The buyer has performed or is ready, willing, and able to perform all their obligations under the contract, such as tendering the earnest money or securing financing if required.
- The seller breached the contract by refusing or failing to perform their obligations without legal justification.
- There is no adequate remedy at law (i.e., money damages are not sufficient).
- Equity favors enforcement.
As specific performance is a discretionary, equitable remedy, New Jersey judges evaluating a request for specific performance will consider fairness, hardship, delay, and whether the contract was formed or performed in good faith. In practice, buyers are more likely to obtain specific performance than sellers. That makes some inherent sense. A buyer won’t be able to find an identical property, while the seller will reap the proceeds of the transaction, no matter who the buyer is.
How to Seek and Obtain Specific Performance of a Real Estate Contract
In New Jersey, lawsuits seeking specific performance are typically brought in the Chancery Division of the Superior Court, which has jurisdiction over equitable remedies. Usually, a buyer seeking specific performance will also record a notice of lis pendens against the property’s title. As a lis pendens is a cloud on title, it usually has the effect of hobbling the owner’s ability to sell the property to another party while the lawsuit remains pending. Lawsuits can also be brought via an emergent application seeking to prevent a seller from selling the property to a third party.
If the court ultimately grants specific performance, it may issue an order directing the seller to execute a deed and closing documents. It can even appoint a court officer to do so if they refuse.
Specific performance remains one of the most powerful remedies in New Jersey real estate law when a deal goes south, but it is also one of the most nuanced and one where judges have broad discretion. The numerous factors at play, along with the sometimes nebulous concepts of fairness and equity, can make it a challenge for a buyer to succeed in their efforts to acquire the desired property. That is why any purchaser dealing with a seller who tries to walk away from their agreement should work with an experienced real estate litigation lawyer. Your lawyer can be the determinative factor between salvaging the transaction and losing a much-desired property.
If you have questions or concerns about specific performance or disputes involving real estate transactions generally, please contact Lawrence Shapiro at Ansell.Law.