Walk Away from Purchase Agreement that expires

[PLam]

My JV partner and I signed a purchase agreement with a vendor for the private sales of his house in Edmonton about 9 months ago with a small deposit of $5K. The deal is to close in about 1 month from now. The house has now dropped about 10% in value. Upon review the purchase agreement, my JV partner discover 2 errors: Firstly, the legal address is incorrect. Secondly and much more serious is that the acceptance of the offer by the vendor is two days after the offer expired. However, we did subsequently execute a subject condition removal.

My JV partner want to walk away from the deal claiming that the purchase agreement is invalid because it has expired before acceptance. The subject removal execution on a expired offer also has no validity. The vendor is now totally pissed and want to sue. My lawyer told us that there are some strength in our argument because the wordings of a real estate agreement is paramount. If the agreement said it will expire by such time, it will then expire. However, it is still up to the judge to decide.

Does anyone has any similar experience like this and would like to share? I appreciate any advice. I hate lawsuit. It is a waste of time and money but my JV partner walks. What to do?

Peter
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[SamEfford]

I am not a lawyer howver my thoughts are that you removed conditions, so you agreed to the terms of the deal as how it was written, even with the offer being accepted late.

As for the legal address being incorrect, the intent of the document is for the purchase of that particular property. Again, I am not a lawyer, but I do not think the complete agreement can be considered invalid for one error.

Do you have a Plan B (reserve cash to ensure the deal goes through)? Who is the real estate expert in the deal? If you, then if the property will still cash flow and the fundamentals are good, you need to sell the deal to your money partner and explain that the market does flucuate and 10 months ago the prices were higher and have corrected. Edmonton is still the #1 town to invest in Alberta (making it #1 in Canada) and the property will still see a rise in value, and some positive cash flow as a bonus.

 

[Nir]

Peter,

In my opinion you guys really have no case here and you must close based on the agreement. if he takes you to court he will definitely win - both things you mentioned are unfortunately bad excuses the judge will not buy.
HOWEVER, you have other options like negotiate with your partner (yes, your partner) or with the seller - he might still decide not to take you to court for different reasons.

Good luck!
Neil

 

[RedlineBrett]

QUOTE (investmart @ Jun 10 2008, 09:55 PM) Peter,

In my opinion you guys really have no case here and you must close based on the agreement. if he takes you to court he will definitely win - both things you mentioned are unfortunately bad excuses the judge will not buy.
HOWEVER, you have other options like negotiate with your partner (yes, your partner) or with the seller - he might still decide not to take you to court for different reasons.

Good luck!
Neil

I don`t agree with this. I agree with your lawyer that you may have a case. Proper paperwork is very important in real estate.

But I don`t think it matters as I bet you spend a lot more than $5k on legal fees to get this resolved.

Your deposit is only $5k. That`s gone, kiss it goodbye. However, if the seller cared so little about the deal to:

1. Not pay for an agent to professionally administer the contract and prevent paperwork errors
2. only ask for a $5k deposit
3. wait 9 months for his money

I think he will have a tough time convincing a judge he has been so harmed as to deserve further damages.

If your JV wants to walk he needs to write you a cheque for $2500 or for whatever share he had in the deal. You need to tell him that you guys entered into the deal as partners now you need to exit as partners and for him to leave you high and dry and out your deposit is unethical.

So you lose $2500 rather than 5%.

Also, if the guy sues you do you think it will be for more than the money you would have lost if the property really did drop in value? He can posture all he likes about taking you to court its a different thing altogether for him to get off his behind and have a notice served to you.

It`s not a great situation to be in.. but you need to put the screws to your partner to be in this with you and honestly I`d call the sellers bluff and wait him out to see if he actually tries to take you to court... and based on his case and some time with your lawyer you decide whether to re-awaken the deal or not.

Good luck,

BT

EDIT - I also agree with Sam`s advice above - markets do fluctuate and if it were any property I negotated a deal on a 10% drop this year wouldn`t matter as it would cash flow and make up that 10% in the next year or two. I am not advocating you walk, just that you haven`t been dealt too horrible a hand.