Specific performance is a legal remedy in real estate that requires a party to follow through with their end of a deal, instead of just paying damages for not doing so.
It’s a tool that’s typically used when financial compensation wouldn’t be enough to make the other party whole—especially in real estate, where properties can be quite unique. The court steps in and says, “You agreed to sell this property, and now you have to stick to that agreement.”
For example, let’s say a buyer signs all the paperwork and hands over a deposit for a specific property. The seller, however, suddenly changes their mind and decides they don’t want to go through with the sale, perhaps because they got a better offer. In this case, the buyer can sue for specific performance to force the sale to go through as originally agreed upon. No amount of cash can make up for losing a one-of-a-kind property they had their heart set on.
When Can Specific Performance Be Enforced?
For a court to enforce specific performance, certain conditions must be met. First and foremost, the contract must be valid and legally binding. There’s no going after someone if the paperwork isn’t solid. Second, it has to be shown that money damages wouldn’t be enough to fix the problem—maybe because the property is unique or holds personal value beyond its market price.
The person asking for specific performance also needs to prove they’ve held up their end of the deal. If a buyer hasn’t gotten their financing together, for example, they won’t have much ground to stand on in court, especially with a good real estate attorney. Finally, the party looking to enforce specific performance must show that the other party is flat-out refusing to meet their obligations without any legal excuse.
Common Situations Leading to Specific Performance
Specific performance is often used in real estate because properties are considered unique assets. No two parcels of land or homes are exactly alike, so if a seller backs out, the buyer can’t just go out and buy a duplicate. This makes real estate one of the most common areas where courts enforce specific performance. Below are some common situations where this typically comes into play:
- Property Sales Gone Wrong: The most frequent scenario involves a seller agreeing to sell a property, but then refusing to close on the deal (See Tierney v. Javaid as an example of specific performance). This could happen for several reasons—maybe the seller received a better offer after signing the contract, or maybe they had a change of heart about moving. Regardless of the reason, if the buyer has fulfilled their obligations, they can sue to enforce the sale.
- Unique Property Purchases: Sometimes, a buyer is set on purchasing a unique property, such as a historic home or a parcel of land with specific features that can’t be replicated. In these cases, no amount of money can replace the loss of that particular property, making specific performance the best remedy.
- Developer or Investor Scenarios: Large-scale developments or investment properties often involve complex agreements with multiple stakeholders. If a seller backs out or a buyer fails to close, it can throw off timelines and potentially cost millions. In these high-stakes deals, specific performance might be the only way to keep the project on track.
Courts will generally only grant specific performance in real estate when the buyer can show that the property is special or that their loss would be too significant to be measured in money alone.
Buyer and Seller Obligations
To succeed in a specific performance case, both the buyer and the seller must meet certain obligations. Courts won’t force the sale if the buyer hasn’t fulfilled their end of the contract, no matter how much they want the property.
The buyer has to prove they’ve done everything required—this could mean securing financing, making the necessary deposits, or completing any other conditions outlined in the agreement, like getting an inspection or appraisal done. Essentially, the buyer needs to show the court that they’re fully prepared to close the deal and are ready, willing, and able to proceed with the purchase.
On the other side, the seller has to be in breach of the contract without a valid reason. If the seller refuses to transfer the deed, stalls the closing, or outright refuses to comply, the buyer can pursue legal action. The burden is on the buyer to prove that the seller is unjustifiably holding up the sale.
For example, imagine a situation where a buyer agrees to purchase a commercial property and takes all the necessary steps, including securing a loan and making a deposit. The seller, however, gets cold feet and tries to back out, claiming they’ve found another buyer who is willing to pay more. Here, the buyer can take the seller to court for specific performance, showing that they’ve done everything on their end and that the seller is trying to break the agreement unjustifiably. The court would step in, forcing the seller to complete the sale.
Is Money Still on the Table?
In some cases, even when a buyer seeks specific performance, they might also be able to pursue monetary damages. This can happen when the failure to close on the property has caused additional financial harm beyond simply losing out on the purchase. However, this is not always straightforward. Courts typically view specific performance and money damages as two separate remedies—specific performance aims to force the sale, while damages compensate for any financial losses resulting from the delay or breach.
For instance, if the buyer had to spend extra money on temporary housing because the seller refused to close on time, they might be able to recover those costs in addition to pushing for the sale to go through. That said, pursuing both remedies simultaneously can complicate things, as courts might lean toward one solution or the other depending on the specifics of the case.
Defense Strategies Against Specific Performance
Sellers who want to avoid being forced into specific performance have several potential defense strategies:
- Invalid or Unenforceable Contract: The seller can argue that the contract itself is flawed, perhaps due to a lack of mutual consent, missing key terms, or legal errors in drafting. If the contract isn’t legally binding, the seller can’t be forced to perform.
- Failure of Buyer Obligations: If the buyer hasn’t fulfilled their side of the bargain, like missing a payment deadline or failing to secure financing, the seller might argue that the buyer has forfeited their right to enforce the contract.
- Undue Hardship: The seller can claim that enforcing the contract would cause them significant financial harm, making it unfair to go through with the sale.
- Adequate Remedy in Money Damages: If the buyer can easily find another similar property, the seller could argue that money damages would be enough to make the buyer whole, and specific performance isn’t necessary.
Act Fast: Statute of Limitations
When it comes to specific performance in real estate, time is of the essence. Every state has its own statute of limitations for which you must file your lawsuit. In real estate, this timeframe can range from two to six years, depending on where the property is located. For example, in Texas it’s 4 years. If you miss this deadline, you lose the ability to pursue specific performance, no matter how strong your case may be.
The clock usually starts ticking when the breach of contract occurs. For example, if a seller refuses to close on a deal by the agreed-upon date, that’s the point when the statute of limitations begins. It’s important to act quickly, not just because of the legal deadline, but because evidence can fade, witnesses’ memories can become unclear, and the situation can grow more complicated as time passes.
Another factor to consider is that delays in filing a specific performance lawsuit could impact the outcome. Courts may view prolonged inaction as a sign that the buyer isn’t serious about enforcing the contract, which could weaken the case. For instance, if a buyer waits several years after the seller refuses to close, the court might question why they waited so long and whether the property is truly as unique or irreplaceable as they claim.
Additionally, specific performance is considered an equitable remedy, meaning the court has discretion over whether to enforce it. If you wait too long to file your claim, the court might decide that the delay has made it unjust to enforce the contract.
