Legal Recourse When Buyer or Seller Refuses to Close
Typically, a commercial real estate contract drafted by a lawyer will contain provisions which spell out the remedies if a party defaults. For example, if the buyer defaults, the contract might state that the seller retains the deposit as liquidated damages. If there is nothing in the contract dealing with default, if the seller defaults, in most states the buyer can go to court and seek an order of specific performance. This order requires the seller, under penalty of being held in contempt of court, to transfer the property to the buyer upon payment of the agreed purchase price. This is based on the assumption that each piece of real estate is unique and that money alone cannot adequately compensate the buyer for loss of the desired property.
Alternatively, the buyer can seek monetary damages for the difference between the contract price and the fair market value of the property assuming it is higher than the contract price. The buyer may also be able to recover consequential damages such as mortgage application fees and appraisal fees paid in reliance on the contract.
If the buyer defaults, the seller can also seek money damages. In this case, it would be the difference between the contract price and the lower fair market price. For example, suppose the contract calls for the buyer to pay $500,000 but the fair market value of the property is only $450,000. The seller would expect to be awarded a judgment for the $50,000 in lost profit. It is relatively uncommon for a court to order a buyer to complete the purchase by paying the entire purchase price.