The case outlined in this post is a prime example for why real estate developers should be certain they hire competent legal representation, in the beginning, before they sign contracts! The case is The Vue v. Sherman (to read the opinion click HERE). On Dec. 6, 2011, the N.C. Court of Appeals ruled against the Vue’s condo developer in their lawsuit against two contract purchasers seeking to force them to buy units they signed contracts to buy – but later backed out of and refused to purchase. The Court found that the language in the contract only allowed the condo developer to keep the contract buyers’ deposit as “liquidated damages” and could not force them to buy the units per the common law remedy of specific performance. Problem was, according to the Court, the Vue’s standard purchase contract contained language providing the remedy of liquidated damages as to the condo developer (i.e. retention of the earnest money deposit), but provided for the reservation of other remedies available at common law to the purchasers (but did not reserve such additional common law rights as to the condo developer). The trial court’s interpretation of the agreement precluded insertion of additional rights – i.e., the
right of specific performance – not provided in the purchase agreement as to the condo developer. The result? The Vue is stuck with more inventory it cannot sell at the previously contracted sales price and they only collect a mere 10% earnest money deposit as the available remedy for the buyer’s breach of the purchase agreement – which probably does not make them very happy after spending boatloads on attorneys fees to find this out!
The Kuhn Law Firm represents developers in real estate transactions and in court. Let us know if we can help you avoid potential pitfalls when assembling property or planning for the development of your project. If the deal craters or you face claims from contractors, investors, lenders, or others, contact our attorneys for representation in any litigation matter as well.
