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10/17/13 It's The Law: Seller Has Options When Buyer Defaults

lt's The Law

Seller Has Options When Buyer Defaults



I have a contract for sale of my condominium. The buyer told me he no longer wants to close. Assuming the buyer fails to close, what options do I have?


In any breach of contract case, the first order of business is to read the contract. The contract may specify options or procedures for breach of contract issues.

Some contracts mandate pre-suit mediation or even arbitration. Mediation is a process where the parties meet with a neutral mediator and purportedly work toward settlement. Arbitration takes the place of a lawsuit by submitting the case for decision by a third-party arbitrator or panel of arbitrators. Unless the parties waive compliance with those requirements, filing suit may result in dismissal of the case until mediation or arbitration is completed.

The contract may also limit your remedy to claiming the deposit. This is known as a liquidated damages clause. To be enforceable, liquidated damages must be a reasonable effort to estimate damages from breach where those damages cannot be readily determined at time the contract is entered. Liquidated damages clauses are generally enforceable. If the deposit is extremely large and forfeiture would be unconscionable, the court will refuse to enforce it.

If your contract has a liquidated damages clause, read it carefully. Some contracts provide that in event of default by a buyer, the buyer loses any deposit made or which was supposed to be made under the contract. If the buyer has made no deposit and is not required to make a deposit, limiting your remedy to forfeiture of the deposit will be deemed illusory and thrown out by the court, leaving you with all other remedies available to a seller in breach of a real estate sale contract.

Assuming you pass the hurdles discussed so far, you might consider suing the buyer for damages. Your damages would be the difference between the contract price and the fair market value of the property at the time of breach, giving the buyer credit for anything the buyer already paid you. You might also get additional damages if you can show you have been harmed and that the damages were natural and usual from the breach and contemplated by both parties. Those damages might include additional payments on mortgage, assessments or other expenses directly related to the property.

You might recover attorney fees, but only if the contract provides for recovery of fees. Attorney fees are generally recoverable only if provided for by contract or statute.

You also have the option of suing your buyer for specific performance. That means you ask the court to order the buyer to buy your property in accordance with the contract terms. As part of that case, the final judgment will usually require you to execute a deed and deposit with the clerk if the buyer does not purchase by set date. In some cases, the judgment orders the clerk to sell the property and apply the proceeds of sale to the amount due from the buyer, thereafter giving you judgment for the difference.

One thing you need to keep in mind throughout your deliberation and proceedings is that pursuing your buyer may be expensive. Court costs, attorney's fees and your time will all be involved. If you want to sue for damages, you should assess the likelihood of recovery. You do not want to end up with a judgment against a penniless defendant. You should discuss options, costs and likelihood of success with an experienced attorney before proceeding further.

By: William G. Morris, Esquire

William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Florida. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. He writes this column periodically with respect to legal matters that frequently affect non-lawyers. The information contained in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney.

Questions for this column can be sent to: William G. Morris, e-mail: wgmorrislaw@embarqmail.com or by fax, (239) 642-0722 or

The Marco Island Eagle

Other articles of interest can be viewed at our website, www.wgmorrislaw.com.

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