A “default” occurs when a party to a contract does not perform its obligations. When one party defaults, the other party may have remedies that are spelled out in the contract. For example, if a Seller refuses to convey title to the Purchaser, the Purchaser may be able to seek “specific performance” from a court of law, ordering the Seller to convey title to the Purchaser.
Conversely, if a Purchaser decides it no longer wishes to purchase the property the Seller may be entitled to retain the Purchaser’s downpayment as liquidated damages.
In most instances, defaults are cured. For example, if the Purchaser adjourns the closing for an unreasonable period of time, the Seller may serve a “Time is of the Essence” notice setting a date certain for the closing. In most instances, the Purchaser will attend the Time is of the Essence closing so as not to risk losing their downpayment. Because litigation is expensive, time consuming and unpredictable, most disputes will settle before going to litigation. Alternative dispute resolution, such as mediation or arbitration can also be utilized to avoid litigation.
*Thank you for taking the time to read this article. This article is part of our “From Contract to Closing; Demystifying NY Residential Real Estate” Series. Other aspects of residential real estate transactions in New York are discussed in other Parts of this series.
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