Understanding and Managing Breach of Covenant in Real Estate§
A breach of covenant is essentially a failure to honor a legal agreement. When parties enter into contracts, they commit to engaging honestly and in good faith toward their mutual commitments. This unspoken promise implies that neither party will obstruct the other’s entitled rights under the agreement.
In real estate, breaches of covenant most commonly appear when one party—often the seller—fails to meet their obligations as per the contract. Imagine entering into a sales agreement to purchase a new home and just before finalizing the purchase, the seller decides not to proceed. This refusal constitutes a breach of covenant of good faith.
When such a breach arises in real estate transactions, the consequences can be significant. The aggrieved party has the legal right to initiate litigation. Through the court process, the wronged party may be awarded damages for the adherence failure of the other party.
Consider the following enhanced example for clarity:
Example: A Home Purchase Gone Awry§
Imagine Sarah, who has eagerly entered into a sales agreement to purchase a charming three-bedroom home. After spending several weeks in negotiations and making arrangements for the move, Sarah receives unexpected news—the seller, Mr. Thompson, has decided to back out of the agreement right before the closing date.
In this scenario, Sarah may rightfully see this as a breach of covenant. She put resources, time, and effort into the failed transaction, and Mr. Thompson’s sudden refusal emerges as an unfair newly introduced barrier. To rectify the situation, Sarah can initiate legal action against Mr. Thompson, seeking compensation for the breach’s financial and emotional disruptions.
Proactive Measures to Avoid Breach of Covenant§
Here are several proactive steps you can take to avoid such breaches in real estate transactions:
- Clear Communication: Maintain open and detailed discussions throughout the contract negotiation and fulfillment process.
- Documentation: Ensure all agreements are well-documented and both parties are fully aware of their obligations and deadlines.
- Legal Review: Consult with a real estate attorney to review agreements and to provide advice specific to your situation.
By nurturing these best practices, the likelihood of running up against a breach of covenant diminishes, leading to smoother and more reliable real estate dealings.
Related Terms: contract breach, real estate law, good faith, litigation, seller obligations.
