Negotiate a signed release to back out of contract
Q. My wife and I signed a contract to purchase some vacant property. We put down about $20,000 and were scheduled to close at the end of June. There was no financing contingency and all the other contingencies built into the contract have been met.
A far more attractive offer has now presented itself. This property is somewhat similar to the property we signed the contract on but the price is $5,000 less per acre. This new property also has fewer low areas. We would love to cancel the old contract and make an offer on the new property.
Losing $20,000 would hurt, but we would far make up for it in the difference in cost between the two properties. Is there anything else I should be thinking about? Is it just a matter of "We want out and you can keep the deposit?"
A. You are considering breaching your contract, which is an act that should not be taken lightly. I strongly recommend you consult with a real estate attorney before taking any action.
Without looking at the contract, one issue you must consider is damages. Most contracts provide that in the event of a breach or default, the non-defaulting party may pursue any and all remedies available to him or her. One of those remedies in any breach of contract action is the loss the non-defaulting party suffers as a result of the breach.
For example, you enter into a contract to buy parcel A for $200,000. You change your mind and fail to honor your obligations under the contract, without legal justification. The seller then sells the property to another party for $150,000. So long as the seller acted in good faith in the subsequent sale, seller could claim damages of $50,000 in his breach of contract action against you. In addition, many contracts also will provide that in the event the non-defaulting party is successful in the litigation, his or her attorneys fees and court costs will be paid by the defaulting party.
One strategy might be to contact the seller and attempt to negotiate a settlement. Offer the seller some amount of money in exchange for his releasing you from the contract. In the event the deal is made, make sure you obtain a signed release from the seller before tendering the settlement proceeds.
Q. I am doing some remodeling at my home. I took your advice and insisted the general contractor give me a sworn contractor's statement showing all the subcontractors he was hiring. I understand that I should not pay my general contractor everything that is owed to him unless I get lien waivers from all the subcontractors he lists. My question is: How do I know he is listing all the subcontractors? If he fails to list a subcontractor and that subcontractor is not paid, can't that subcontractor still file a lien against my house?
A. Yes, any subcontractor that is not paid retains his or her lien rights regardless of whether or not the general contractor lists that subcontractor on a sworn statement. This is, of course, presuming the subcontractor complies with the provisions of the Mechanics Lien Act. However, the Mechanics Lien Act further contains a provision to protect owner occupied homeowners.
Any subcontractor performing work or furnishing materials to an owner occupied home must, within 60 days of first performing work or furnishing materials, give notice to the homeowner containing the following information: 1) that he or she (the subcontractor) has been retained by the general contractor, 2) identify the work that is being performed or materials furnished and 3) the amount due that subcontractor. Failure to provide this notice will, in most cases, eliminate the lien rights of the subcontractor.
Given the above time requirement, do not pay the general contractor in full until you are positive that 60 days has run from the date each subcontractor performed work or furnished materials to the property.
• Attorney Tom Resnick's column appears in Homes Plus. Send your questions to Tom Resnick, 345 N. Quentin Road, Palatine IL 60067, by e-mail to tdr100@hotmail.com or call (847) 359-8983.