By Benny L. Kass
Saturday, August 2, 2008

Q I signed a contract to buy a condominium unit in the District, but the seller apparently has changed his mind. I think I am getting a good deal and don't want to let him off the hook. What remedies do I have?

AStart by reviewing your sales contract. Most residential transactions in the Washington area use the regional sales contract, prepared by Greater Capital Area Association of Realtors.

Paragraph 26 spells out what happens should either the buyer or the seller default.

Referring to a seller default, the standard contract states: "If Seller fails to perform or comply with any of the terms and conditions of this Contract or fails to complete Settlement for any reason other than Default by Purchaser, Purchaser will have the right to pursue all legal or equitable remedies, including specific performance and/or damages."

Some sellers attempt to modify this to read that should the seller default, the buyer's only remedy is to receive a refund of the earnest-money deposit. I cannot recommend that buyers accept such a modification because this language basically would give the seller the right to sell the property for a higher price to a third party, without any obligation to the original buyer except returning the deposit.

In a specific-performance lawsuit, one of the remedies under the standard contract, you would go to court and ask the judge to order the seller to proceed. To sue for specific performance, you as a plaintiff must tell the court that you are "ready, willing and able" to go to settlement.

The D.C. Court of Appeals recently handed down a decision that should be instructive for all parties to a real estate transaction. Toxi Clark entered into a contract to buy a house in the District from James and Joyce Route. The contract required the sellers to complete a number of items before settlement. The parties had a walk-through inspection of the property two days before the scheduled settlement, and the plaintiff found that one item dealing with waterproofing had not been done.

Clark, upon learning that the sellers did not intend to complete the waterproofing work, told them, "see you in court" and walked out. Clark postponed the scheduled settlement and put her loan application on hold.

Shortly after, Clark sued the sellers for specific performance; she did not ask for any money damages. The lower court ruled against her. She appealed to the District's highest court.

On July 3, the appeals court affirmed the denial in Clark v. Route.

The trial court had the right to determine whether a plaintiff was, in fact, "ready, willing and able" to settle, according to the appeals court. Unless she met that test, she would not be eligible to win the specific-performance suit.

The facts of the case persuaded the appeals court to uphold the trial court's ruling. The court found that by not going to settlement and by putting the loan "in limbo," Clark had unilaterally modified the contract. It did not accept Clark's argument that the sellers had breached the contract.

"To sustain the right to specific performance of their contract, purchasers must show that they have performed or have offered to perform all of the obligations required of them by the contract," the court found. The court was also disturbed that Clark ceased communicating with the sellers and instead filed the lawsuit.

When a court is faced with determining whether to grant specific performance, it has to make a judgment based on the equities of the two parties. This means the judge has to decide whether, based on the facts, the plaintiff buyer fairly treated the defendant seller. In law school, an expression we learned was that you have to "have clean hands in order to seek equitable relief."

In this case, the trial court and the high court did not think Clark's conduct was sufficient to grant her the equitable relief she was seeking; presumably, the courts concluded that she did not have "clean hands."

The court provided guidance as to the alternatives available to buyers when a seller refuses to comply with the terms and conditions of a real estate sales contract:

· The buyer could refuse to go to settlement and then file a suit against the seller for any damages they might have sustained.

· The buyer could go to settlement and then sue "to recover from the seller such damages as they may have sustained by reason of" the seller's failure to comply with the requirements of the contract.

Courts will grant specific performance in many cases, but you really have to be "ready, willing and able" to complete your end of the bargain.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed, stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site,http://www.kmklawyers.com.