Enforceable Purchase Agreement?

Question

We signed Purchase Agreement for a duplex in Probate requiring court confirmation. Covid19 comes along and I'm worried about cash and other rental property and new law where we cannot evict for owner occupancy.  We give forms to seller to back out because of Covid19.  Seller wants to keep deposit and we don't come to an agreement.  Court confirmation date set for July.  Seller lists property for sale and signs a second Purchase Agreement and takes a deposit on that sale.  So, now two Purchase Agreements exist for the same property.  I know this can't be correct.  Seller's probate attorney planning to go into court to get rid of court confirmation.  New buyer has 17 days to get out of deal if they want.  They are anxious to settle with us now.  First, is our contract still enforceable if they've entered into another contract to sell?  I think the agents were so anxious to sell, they didn't consult the probate attorney representing the estate.  Is our contract voided by their acceptance of the second contract?  If that's the case, we would be entitled to our entire deposit back.  I hired a Probate attorney to navigate probate court.  Also, our real estate agent is the partner of the listing broker in their firm.  They did send us a copy of the signed Purchase Agreement with the new buyer.  They never served us with a Notice to Buyer to Perform.  Any advice helpful.

Lorraine Joffe · Answer

We sent them CAR Form CC (Cancellation of Contract, Release of Deposit and Cancellation of Escrow); CAR Form CVA (Coronavirus Addendum or Amendment); Form NUCC (Notice of Unforeseen Coronavirus Circumstances).  They did not sign it.  We indicated that one of the reasons we were purchasing the duplex was for owner occupancy.  Los Angeles now prohibits this so for us, it was "frustration of purpose."  They want to void the court confirmation and will be going into court ex parte to allow them to sell without court confirmation so they can sell according to the second Probate Purchase Agreement.  Our contract wan't terminated by them and seems unethical to me to enter into another Purchase Agreement without terminating ours.

Wayne Brooks · Answer

@Lorraine Joffe Have you done anything to officially back out of your contract, or did you simply advise them you were considering it?

If you haven’t officially backed out, wait to see if they meet the court confirmation deadline. If they don’t then you’re since They couldn’t fulfill the contract.

When you say “we gave forms to back out...” did both parties sign it? Did it address the EM?  The corona issue has been discussed/debated/tried as a force majure event often, recently...outcomes/decisions seem to vary, but it seems that just “market uncertainty” doesn’t hold up.

And no, them signing another purchase agreement doesn’t void yours....it just opens up another can of worms for the seller (which could benefit you) if your contract hasn’t been properly terminated.

In short, we don’t know exactly What you sent them and whether both parties signed it or not.

Sean Tagge · Answer

Hey Lorraine,

#1 consult with a local RE attorney in your area for this, but in general and from my previous experience here is what I would be asking:

When did you get this under contract? When did you submit earnest money deposit?

It would depend on the contingencies in your contract with the seller. Did you have an inspection period? When did it end? Did you cancel the deal before or after that inspection period?

Did you have a financing contingency? That can be in place until closing so was your reason for backing out due to lenders not lending through COVID or even unsatisfactory rate and terms and be a reason to back out of financing contingencies.

Additionally. Did the seller stick to all of their terms in the purchase and sale agreement like providing all tenant lease agreements, rent rolls and balance sheets in a timely manner etc?

I guess those are the first questions I would ask to determine if the seller can keep the earnest money or have to return it.

Ultimately if both of you cannot come to a decision this will go to court and a judge will decide. I would make sure to collect all things you've said in writing including emails and texts.