Breaking a Real Estate Contract - Commercial Building Purchase.

[randee]

What a neat site, very useful information. Thanks for having me.

What is the name of your state (only U.S. law)? I am in Iowa.

I purchased a building by contract in 2009. My business is failing and I would like to get out of the contract and let the property go back to the original owner. I am behind on the taxes, and I know I will have to pay those to current. What else will I need to do to get out of the contract? I was going to try and sell the property and pay off the contract, but the area's property values have plummeted in the past few years. I can never sell it and even pay off the what I owe.

I imagine every contract is a little different, but normally how does this work?

Thanks for any heads up or challenges I will encounter.

Randy

 

[Zigner]

You will want to contact a local real-estate attorney and business-law attorney. If you're lucky, you may find one that fills both shoes.

 

[justalayman]

when you say "by contract" are you saying you are purchasing it on a land contract or is the seller carrying the mortgage or is it something else?


the first place you need to look is in your contract. Does it say anything about what happens in the case of a default by the buyer?

 

[latigo]

What a neat site, very useful information. Thanks for having me.

What is the name of your state (only U.S. law)? I am in Iowa.

I purchased a building by contract in 2009. My business is failing and I would like to get out of the contract and let the property go back to the original owner. I am behind on the taxes, and I know I will have to pay those to current. What else will I need to do to get out of the contract? I was going to try and sell the property and pay off the contract, but the area's property values have plummeted in the past few years. I can never sell it and even pay off the what I owe.

I imagine every contract is a little different, but normally how does this work?

Thanks for any heads up or challenges I will encounter.

Randy

As Z says, you MUST have a knowledgeable attorney examine the contract to see what remedies are provided the vendor/seller in the event of default.

But for general information, upon default most land sale agreements offer the vendor one of two options: (1) To declare the vendee's rights under the agreement forfeited and retake possession, or.

(2) Affirm the agreement and hold the vendee responsible for his contractual commitments.

Some permit the vendor that elects to hold the vendee to the agreement to accelerate the balance upon default. That is, declaring the unpaid balance immediately due and payable

But the vendor must make an election of the two remedies, meaning he cannot have his cake and eat it too by a forfeiture and then suing for the balance. And once a forfeiture is declared the vendor is committed to that remedy.

And the reason I mention this is that not infrequently a naïve vendor (and even his naïve lawyer) will notice the defaulting purchaser that the contract is being forfeited unaware that by making that election he has waived the other option.

Also, when the vendee elects to forfeit the deal and retake possession some states (including mine) give recognition to what is known as "a vendee equity" which allows the buyer to recover from the vendor any appreciable equity. Meaning current market value in excess of the contract balance due. You will need to discuss this with the attorney.
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Sorry to learn of you misfortune, but don't compound it by trying to deal with it yourself. Real property law is very complicated. Just ask any law student who has suffered through the course.