Seller Beware, Buyer Can Enforce Conditional Offer to Sell Real Property

According to Massachusetts case law, an order directing specific performance of a contract to sell real property is appropriate where one party to that contract, either a buyer or seller, has shown: there is a binding contract to sell property; the agreed time for performance has arrived; and the party seeking performance has performed, or is prepared to perform, his or her end of the bargain.

In a recent case in the Land Court Department of the Trial Court of the Commonwealth of Massachusetts, a seller of real property accepted a buyer’s offer to purchase real property. The offer included certain conditions to the purchase. The seller, determining that it would not meet the conditions to the offer, refused to sell the property and attempted to terminate the offer. The seller’s justification was that it was not capable of meeting certain conditions to the offer that hinged upon delivering a certain portion of the premises free of tenants and occupants, and delivering other space subject to certain lease terms (the “conditions”).

The buyer brought suit to require the seller to specifically perform its obligations in both: a draft purchase and sale agreement circulated among the parties after the execution of the offer; and an order directing the seller to perform its obligations under an offer to purchase. Because the purchase and sale agreement had never been signed, the court correctly dismissed the first claim on the basis that Commonwealth of Massachusetts’s statute of frauds, General Laws Chapter 259 §1, requires that a party may not bring an action to enforce a contract for the sale of lands unless the promise contract or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or by some person thereunto by him lawfully authorized.

However, the court held that, despite the conditions to the offer, the buyer was entitled to specific performance of the offer in part because the offer had been signed by the buyer and seller. The order was not a requirement that the seller sell the property to the buyer, but that the seller cooperate with the buyer’s due-diligence and, provided the seller meets the offer’s conditions and the other conditions of sale, tender to the buyer a deed to the property. Interestingly, pursuant to Normandin v. Eastland Partners, Inc., 68 Mass. App. Ct. 377, 389-390 (2007) a “conditional” order of specific performance is appropriate unless the evidence shows that a party’s performance of the condition is impossible or futile. In this case it seems very unlikely the seller would meet the conditions. Additionally, it would be very easy for the seller to give some effort and still not satisfy the conditions.

The most important takeaway from this case is that an offer, even with conditions, may still require a seller to sell property if the conditions are determined to be the buyer’s conditions to performance, and not the seller’s conditions to performance. In this case, the court determined that the conditions were conditions to the buyer’s obligations to perform only. Given this determination, the court held that only the buyer has the right, and not the seller, to terminate the offer if the seller can’t perform its obligations regarding the conditions; the buyer has the right to extend the time for the seller to perform its obligations regarding the conditions; and the buyer has the right waive those obligations altogether forcing a sale of the property. The court went so far as to give the buyer additional time to notify the seller of the buyer’s election for any of the preceding options. Importantly, the court also determined that if the buyer elected to terminate the offer, the seller would be obligated to direct the broker to return the deposit the buyer made with the offer.

In short, sellers need to understand that, unless expressly stated otherwise, conditions to an offer do not expressly give a seller the right to not perform. Sellers will be required to give effort, presumably at their cost and expense, to meet conditions. Additionally, these conditions, unless expressly stated otherwise, may be likely to be deemed conditions to the buyer’s performance only, and not the seller’s performance.