Seller won't perform - what are my options?

Question

Here's the situation: I have a large commercial property under contract in Texas and am currently in the feasibility period. The contract states that the seller will provide, within 15 days of executing the contract, a whole list of documents, not the least of which is lease copies and rent rolls (there's about 20 tenants). I have a 45 day option, and right now am on day 23. The seller so far (yesterday) provided one lease, and has been unresponsive about the rest. I have spent about $25,000 in due diligence since  getting under contract.

My concern is, I have planned on having 30 days after receiving these documents to complete my due diligence, before my option runs out. I don't want to back out of the deal as I want the property, but I need time for my due diligence after getting these documents. I am going to tell the seller I want him to agree to extend the option period to 30 days after he gets me all of the documents agreed to in our contract. If he refuses (or more likely won't respond), can I sue him for specific performance, or can I only sue for expenses incurred? Can I put a lien on the property so he can't sell it out from under me (I think that may be what's happening as I was told another offer came in the day we signed the contract)?

Thanks ahead of time for any advice!

Jason

Jay Hinrichs · Answer

@Greg H.  30k was release to seller.. then they would not sign  LOL.. if it was just a argument to get the EM back from title I would not have gone the SP route.

It was an order from the judge that I had never seen before I think they are pretty rare.. and so it was not a money judgement it was a order compelling the sale and transfer to us.. with that order the title company recorded the judges order and gave us title insurance..  again never seen one and probably never see another one.  So if you look at chain of title there is no deed giving us ownership just this judges order..  We did have to put the full purchase price up in cash on the closing date in the contract so we performed so our money and it was quite a bit.. sat in escrow for almost 18 months.. then was dispersed.. seller got a nice proceed check.. but would not communicate so title sent it certified they would not pick It up.. So title transmitted the sellers funds to the courts on an interpleader.    we learn something everyday in this business.

Greg H. · Answer

Residential seller ?  It is so rare in Texas except in the commercial realm. Being a homestead state,  courts are very reluctant to force a seller to perform when it comes to their home

John Newland · Answer

It would be prudent to contact an attorney if you are $25,000 in the hole.  Nobody can be sure what provisions were included in your contract, but the seller's breach most likely means your recourse is to decide to pull out of the offer since they default.  All "time is of the essence" basically states is if one party doesn't perform accordingly the other party doesn't need to either.  Usually if one party defaults, the other party can sue for damages. With $25,000 in due diligence out of my pocket that may go to waste because the seller decides they won't perform as agreed, I would certainly be on the phone with an attorney to at least get that back.  The seller's position is most likely, "So I didn't give you what you wanted in the time you requested, nor am I going to at all.  Your option is to close or not close."  The seller certainly isn't acting in good faith.  At this point you need to decide what is more important: proceeding with the deal without the information you feel necessary or getting your $25,000 in due diligence back.

Jay Hinrichs · Answer

state specific of course but it seems like a specific performance type case. King of like in litigation asking for discovery and if the other side does not give it to you in a timely manner they can get sanctioned.

I just did my first full blown SP deal in my career and won.. but now we are trying to evict and they finally lawyered up.. so not sure.. I have title and title insruacne so not to worried there.. but like you I want the property.

Jason Hirko · Answer

Update: I got a lawyer involved (thanks for the advice). He sent the seller a demand letter requesting the due diligence documents and threatened to sue for specific performance and expenses, explaining that he's in breach of contract. The next day, I have all the documents and a 30 day extension of my option. Thanks again for everyone's help

Jason Hirko · Answer

@Jay Hinrichs @John Neuland Thanks for the advice. BTW this is a commercial deal, and I have set up a call with my attorney in case I don't get the response I want. At this point, I've asked him to provide documents required in the contract immediately and extend the option another 31 days for our review. If he says no to that, I'll know he just wants me to go away, and then I'll get the attorney in there.

Greg H. · Answer

@Jay Hinrichs

30K EM would compel me to do something as well. Default judgement?

Our homestead laws are among the strongest. No civil judgments attach with the exception of the Irs , student loans, property taxes and mechanics

Jay Hinrichs · Answer

@Greg H.  I hear ya first one I have done in 42 years in the bizz... normally we just let it ride. and move on

but this one I put up 30k in EM release to seller.. then they just went totally dark.. I mean Dark Dark. would not answer anything and I was not about to let my 30k go poof..

So we did a SP action. and we won.

We have homestead here but that relates to creditors.. this property was free and clear.  I contracted to buy.. I performed seller went dark.. I sued for them to perform they would not.. judge made a ruling and based on that title company closed and issued me title insurance based on judges order.

Wayne Brooks · Answer

@Jason Hirko It would be easy to misstep at this point.  $500-1000 to get an understanding what your options are from a RE attorney would be your best investment, at this point.

Jason Hirko · Answer

What about drafting and recording a Memorandum of Agreement? Heard of this but don't know exactly what's involved... Anyone done this effectively?

Seller won't perform - what are my options?

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