Canceling an apartment purchase contract: everything you need to know
Buying an apartment is a significant milestone in our lives, but it is also a major commitment, involving legal complexities and a significant expenditure of money. At the heart of the process is the apartment purchase contract, a binding legal agreement that specifies and regulates all the terms of the transaction between the buyer and the seller. Among other things, the agreement specifies the agreed price of the apartment, the delivery date of the apartment, the distribution of payments and more. But what happens if, after signing, one of the parties regrets the purchase? How does canceling an apartment purchase contract work?
Cancellation of the contract for the sale of an apartment will be possible in several cases, such as a fundamental violation by one of the parties, defects when signing the contract, the existence of a suspensive or terminating condition stipulated in the contract, and the like. Whether it is a contract for the purchase of an apartment from a contractor or from a private person, a correct and optimal drafting of the apartment purchase agreement by a real estate lawyer will give greater certainty to the parties and allow the cancellation of the contract relatively easily if the appropriate conditions are met. In this article we will discuss cancelling an apartment purchase contract, as well as important basic concepts such as fundamental violation, the types of common violations and the options available in case of violation of the agreement by one of the parties.
In what cases might the buyer want to cancel a home purchase contract?
Buying an apartment is a major transaction that requires preparation, dealing with significant concerns, and involves the investment of large sums of money. There are various reasons that can cause the buyer to want to cancel the deal, such as:
- In some cases, it can be stipulated in the contract that the seller must perform certain actions before completing the transaction, such as making agreed repairs or improvements to the apartment. If the seller does not fulfill his obligations according to the agreement, this may cause the buyer to want to cancel the contract.
- Financial difficulties or inability to finance the transaction – it is possible that the buyer will have difficulty financing the purchased property or did not take into account certain costs involved in the transaction, such as the purchase tax. Inability to meet the obligation to pay does not constitute a justified reason for cancellation on the part of the buyer, and may give the seller the right to cancel the contract and receive agreed upon compensation. Therefore, it is important to be accompanied by a real estate lawyer who can clarify the full economic implications of the transaction even before signing the apartment purchase contract.
- Delay in the delivery of the apartment – after signing the apartment purchase contract, the buyer plans their steps according to the agreed upon delivery date. A delay in the delivery of the apartment can disrupt the buyer’s plans and cause difficulties and additional unplanned financial obligations.
- Hidden defects in the property – if the buyer discovers substantial problems in the property that affect the viability of the transaction, and which were not revealed by the seller during the negotiations before signing the contract, they may certainly want to cancel the transaction.
In order to make sure that the buyer’s rights are protected and in order for them to be able to deal successfully with situations such as those listed above, it is crucial to consult with an expert real estate lawyer. The lawyer will be able to advise when signing the contract, and if the seller has violated their obligations according to the agreement, the lawyer will be able to assess the circumstances and advise on the best course of action.
When may the seller want to cancel an apartment sale contract?
The main goal of the seller is of course to complete the sale and the transfer of ownership of the property. There are several cases in which the seller may want to cancel the apartment sale contract, such as:
- Failure of the buyer to meet the payments stipulated in the contract – if the buyer fails to obtain the required financing and does not meet their financial obligations or the deadlines set for payment, the seller will most likely want to cancel the contract.
- Infeasibility of the transaction – for example, in the case where the seller did not take into account additional costs involved in the transaction, such as a betterment tax, or sold the property at a lower price than they could have received otherwise. The seller has to check all of this data even before signing the transaction, and therefore they cannot cancel the apartment seller’s circular for this reason. In order to avoid these situations, it is important that the seller consults with an apartment sale lawyer before signing the contract.
When can an apartment purchase contract be canceled?
Since the contract is a binding legal document, we can cancel it only if one of the reasons listed are met.
Fundamental breach of the contract by one of the parties:
In every contract for the purchase of an apartment drawn up by a professional lawyer, there will be a section that defines the clauses whose breach will be considered a fundamental violation of the agreement. These are clauses whose violation will be so severe and substantial that in practice it frustrates the possibility of fulfilling the contract as the parties intended at the time of signing.
A fundamental breach of the agreement allows the other party to cancel the contract, and in some cases the injured party will even be entitled to agreed damages as a result of the violation.
Common examples of a fundamental breach in an apartment purchase contract
- Failure to deliver the property at the agreed time – if the seller does not deliver the apartment at the time agreed upon in the contract, it is quite possible that the buyer will have the right to cancel the contract.
- Failure to comply with legal requirements and/or regulations – for example, it is necessary to obtain certain approvals from the local authority in order to complete the transaction and transfer ownership of the property. If the seller failed to obtain the approvals, the buyer will have the option to cancel the contract.
- Concealment of information concerning the property – if the seller hid defects or flaws in the property, or any other important information concerning the property, which it is likely that if the buyer had known about them they would have avoided making the transaction, the buyer may have the right to cancel the contract.
- Failure to transfer ownership of the property – if for any reason the seller fails to transfer ownership of the property to the buyer, this will constitute a fundamental violation, and the buyer will have the right to cancel the contract. If the contract also stipulates agreed compensations in such a case, then the buyer will be able to demand the agreed compensations as well.
What can be done in case of a fundamental violation?
In the event that a fundamental breach of the agreement has occurred, the injured party will be able to cancel the agreement. In addition, in cases where the agreement stipulated fixed compensation, the offending party will be required to pay the agreed amount. For example, if the buyer does not transfer the payments to the seller on the agreed dates or in the event that defects are discovered in the apartment that the seller hid during the negotiations.
If the violating party refuses to cancel the contract or pay the compensation, you can file a lawsuit with the help of a real estate lawyer and demand enforcement and/or compensation.
As mentioned, not every violation of the agreement will constitute a fundamental violation, which would justify the cancellation of the apartment purchase contract or the filing of a lawsuit in court. In the event of a non-fundamental breach, the injured party must allow the breaching party to remedy the violation within the time period stipulated in the contract. An experienced apartment purchase lawyer will know whether the violation is a fundamental breach of the agreement, and what steps can be taken against the violating party, in order to protect your rights.
The existence of a suspending or terminating condition
- A contract with a condition precedent – meaning that the contract that was signed is a valid and binding contract, but it is in a ‘frozen’ status until the existence of a certain condition, usually within a predetermined period of time. If the condition is not met, then the contract is void.
- A contract with a termination condition – unlike a contract with a conditional condition, here the contract enters into force immediately, but its validity may be terminated if a termination condition agreed upon in advance has been met. Here too, the condition usually has to be fulfilled within a predetermined time period.
For example, when purchasing an apartment from a contractor where it is stipulated that the execution of the agreement is conditional on receiving building permits.
A contract with a condition precedent (suspensive clause) may stipulate that the agreement will only enter into force upon receipt of the construction permit, while a contract with a terminating clause may stipulate that the agreement will enter into force immediately and will be terminated if a construction permit is not received.
In both cases, the respective existence and non-existence of the condition, will lead to the cancellation of the apartment purchase contract.
Defects when concluding the contract for the sale of the apartment
The contract law establishes certain conditions that must be met in order for a contract to be binding and valid. When these conditions were not met at the time of signing, it will be possible to file a lawsuit in court in order to cancel the apartment purchase contract. Here are some examples:
Signing a contract due to duress or coercion
The law states that in order for a contract to be valid, the person must sign the contract of his own free will. If it can be proven that that person signed the contract because another person forced him to do so, it will be possible to cancel the apartment sale contract.
For example, in cases where a person signed an agreement whose terms are worse than the market conditions, due to the fact that another person took advantage of the fact that the buyer did not have the mental capacity to understand said terms Another example is when it can be proven that a person signed an agreement out of pressure, such as a case where an adult is physically completely dependent on their children, who pressure said adult to sell the property if they wish to be cared for.
A mistake or misrepresentation
Misrepresentation – The contract law states that if a person entered into a contract as a result of deception, such as hiding essential information or presenting false or incorrect information, they will be entitled to cancel the contract.
Mistake – in the event that a person entered into a contract as a result of a mistake, they may request to cancel the contract, provided that it is not possible to correct the mistake and fulfill the contract as a result of the mistake. It is important to clarify that the parties will not be able to cancel an apartment purchase contract due to a mistake in assessing the economic viability of the deal.
How a real estate attorney can help cancel a home purchase contract
Canceling an apartment purchase contract is not a simple process, whether it is canceling an apartment purchase agreement from a contractor or canceling an agreement to purchase a second hand apartment.
As we have seen throughout the article, there are various things that can go wrong during a transaction to purchase an apartment. Therefore, it is important to understand what your rights are and what options are available to you in the event that the other party violates the contract, and of course to draft the contract in such a way that in the event of the violation of the contract by the other party, your rights will be harmed as little as possible.
Accompaniment by a real estate lawyer in the process of signing the contract will help protect your rights in an optimal way. For example, determining significant agreed damages in your favor in the event of a violation, will help reduce the chance of a violation.
In addition, in the event that you are faced with a situation where the other party has violated a contract to purchase an apartment, an expert lawyer in the field of real estate will advise you on the possible courses of action, and will protect your rights in order to ensure the best possible result for you.