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What is Considered to be a Breach of Contract in Commercial Real Estate?

What is a Breach of Contract?

A commercial real estate contract is a document that contains many terms and conditions which are integral to the contract for the sale of the commercial property.  A breach of contract occurs when a party to a valid contract fails to fulfill their portion of the agreement, whether oral or written.  In essence, it is a broken promise. 

Every breach of contract in commercial real estate is unique because no two properties are the same.  Every physical location is different and most other properties won’t share the same size, improvements, buildings, access, or resources.  Therefore, a buyer can’t just buy the same property from another buyer and the seller loses his/her anticipated capital.

A breach of contract is one of the most common commercial real estate disputes.  When one party breaches a commercial real estate contract, the non-breaching party should understand what remedies are available.

Common Breach of Contract Situations

The most common reasons that parties breach a commercial real estate contract are:

Legal complications with the deed or property title

External or internal damage to the property

The seller decides he/she wants to keep the property

The seller does not fully own the property

The seller receives a higher offer

Failure to pay on time, such as failing to close escrow in the time specified

Remedies for a Breach of Contract

If a party does not follow the instructions of the contract, the non-breaching party may be able to take legal action and file a lawsuit in court.  A breach of contract may be a partial breach or a complete breach.  Some contracts contain mandatory arbitration and mediation clauses. Careful attention should be paid to these clauses before filing any suit.

If you are preparing to sue someone for a breach of contract, you may have the option between legal and/or equitable remedies.

Legal Remedies

Legal remedies provide monetary compensation for damages sustained as a result of the breach of contract.  In addition, the court may order reimbursement for certain items, i.e. out-of-pocket costs.  In certain cases, the court may also award punitive damages.

Equitable Remedies

Equitable remedies are actions rather than monetary compensation.  These types of remedies are usually granted when financial rewards do not provide an adequate resolution.  Some equitable remedies may include:

Specific Performance

This is a court order that requires the breaching party to perform their part of the contract according to the original terms.

Contract Reformation

The court orders the original contract to be rewritten to reflect the actual intentions of each party in more detail. This requires that the original contract be a valid one in existence, otherwise, there would be nothing that requires rewriting.

Contract Rescission

The original contract that was breached is now canceled or rescinded. The parties may write a new contract that better details the requirements of both parties.

Injunction

The judge can issue an injunction that requires one party to stop doing something specific because it is causing irreparable harm to the other party and monetary damages cannot replace or repair the issue.

Constructive Trust

When a party wrongfully obtains the other party’s property and uses it to increase the value of his or her own property.

Advice You Can Count On

Purchasing commercial real estate is often complicated, even for those that have bought and sold multiple properties in the past.  With such high-value properties at stake and so many industry-specific regulations, costly errors can occur.  Because every purchase is different, I can review and customize your purchase/sales agreement before each transaction to help eliminate a potential breach of contract.  In the event of a breach of contract, I will work with you to help ensure you receive proper compensation for the wrongdoing of a buyer or seller.

I’m Rob Robinson, and I can provide you with the legal expertise and guidance you need in order to protect your commercial real estate interests.  I am dedicated to providing personalized service, responsiveness, and high-quality legal counsel.  With over 30 years of practicing law in the Sarasota area, I will formulate a winning strategy to handle your breach of contract case.  Please do not hesitate to contact my office before any paperwork is signed.

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