How current events impact your business and real estate holdings

Saturday, July 23, 2011

Question: Should a real estate seller be forced to payoff liens over the sales price?

A seller with a good attorney will not ever run into this problem because the attorney will utilize a short sale contract where a sale is subject to the seller's ability to obtain a full release of liens by way of only the proceeds of sale. In such a situation if the lien holders will not provide a release, the seller can cancel the contract without suffering damages.

Yet, I was called this morning by a contractual purchaser of a property where the contract allegedly does not include any right to cancel for the seller if the lien holders will not release their liens by way of an accord and satisfaction - the traditional short sale scenario. The contractual purchaser wants the property without any liens. Now what?

I suggested that the seller should be able to sue for either specific performance (forced sale with paid off liens) or for benefit of the bargain monetary damages. Yet, I cautioned that not only are the terms of the contract operative and may preclude either remedy, but that this is not often frequented territory and its therefore unpredictable.

What do you think? Should the seller just be able to cancel the contract? Or, should the seller have to reach into their own pocketbook to satisfy existing liens? What happens if there is nothing in that pocketbook?

Remember law is not often easily predictable and many different factors will play into the result.

Maybe, the easiest solution would be for the potential purchaser to just go to the beach and forget the whole thing. It is awfully hot to think of anything else.

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