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Criminal Defense Blog Post

Remedies for Breach of Real Estate Purchase Agreement by the Buyer

Long Beach City Council voted in April to sell a 10-storey building known as City Hall East for $2.1 million. The deal has been questioned by some real estate investors, who claim that the purchase price is significantly lower than market value, and that the city has agreed to abnormal penalties if it breaches the purchase agreement.

The agreement stipulates that should the city breach the contract, it is liable to pay $1 million compensation to the buyer, 100 LBB Real Estate LCC. On the other hand, if the buyer breaches the contract, it only forfeits its deposit of $250,000.

Under California real estate law, if a buyer has breached a real estate purchase contract in which you are the seller, you may have several possible remedies:

  • Breach of contract damages. You can claim damages for the difference between the contract price and the value of the property on the date of breach.  You can also claim consequential damages and interest. In a stable or rising market, this does not usually provide significant compensation, but may be helpful in a falling market.
  • Liquidated damages. As an alternative to breach of contract damages, contracts often stipulate a fixed amount of damages to be paid to by the buyer if the buyer breaches the contract. This can be an effective deterrent against a buyer breaching the contract, as well as providing significant compensation in the event of a breach.
  • Specific performance. In a market facing an economic downturn, some sellers may seek to enforce the purchase contract against the buyer, using the equitable remedy of specific performance. To utilize this remedy, you cannot attempt to sell the property for the duration of the lawsuit, as you must remain ready, willing and able to complete the sale to the buyer.

The clause requiring the City of Long Beach — the seller — to pay liquidated damages in the event of breaching the contract is unusual, but may reflect new realities since the market downturn of the previous few years.

If you are involved in a real estate contract dispute, you should contact an experienced California real estate attorney to discuss your options.

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Creech Liebow & Kraus
333 West San Carlos Street, Suite 1600
San Jose, California, 95110-2726 USA