44 SIDELINES JANUARY 2012
FOR HORSE PEOPLE • ABOUT HORSE PEOPLE
E
Q
U
I
N
E
L
A
W
Tis the Season
to Buy a Farm
By Lisa Hollister, Esq.
At this time of the year, horsemen are gearing up for
the show season and looking for that perfect spot to
enjoy the winter. Once you have found the property you
want, you will obviously do your due diligence and make
sure the home and barn are exactly what you want as
well as structurally sound and determine if any necessary
fnancing is available. During this tenuous time when you
are still having structural engineers look the place over,
you want to make sure not to lose your right to purchase
the property. Commonly this is done by the execution of
a real property “Binder Agreement”. But what are your
rights if the seller backs out before the sales contract can
be signed? In at least one case a dispute landed the
parties in litigation.
Boucher v. Walker, 2011-51420 (NY Misc) 2011
Facts
This unpublished New York opinion arose as a result
of a real property (real estate) Binder Agreement under
which Heidi Walker, agreed to sell three parcels of land,
which together formed a horse farm known as “Field
Point Farm”, to plaintiff, Thomas Boucher, Jr., for 1.5
million dollars. The parties executed the Binder which
specifcally stated, “This agreement is to be binding and
remains in full force unless or until the same is replaced
or superseded by a further and more complete agreement
between the parties hereto.” In the Binder Agreement,
Walker as seller, described the land and structures, the
farm equipment listed in the sale, price of the purchase
as 1.5 million dollars and a closing date of “ on or about
3/15/2011” as well as other terms. After a series of
initialed changes, the binder was fully executed by both
parties and the parties through their counsel began further
negotiations over the various additional terms. It was at
this time that the seller realized that the sale price would
be insuffcient to satisfy the mortgages on the property
and pay her closing costs, by a shortfall of approximately
$105,584. Not including brokerage and legal fees. As
a result, seller’s counsel informed buyer’s counsel that
the agreement would need to
be made subject to seller’s
ability to secure a short sale
from her mortgagees.After
the binder was signed but
before the seller realized her
shortfall, Walker received a
second offer for an amount
which would cover her costs
and a proft. Seller entered
into a contract to sell the
property to the party that
made the second offer. As a
result, Plaintiff sued claiming
that the parties had an
enforceable contract and that
the Court should grant specifc
performance enforcing the
sale. (when the property is
unique such as real estate,
the court of equity can order the sale of the property rather than
a monetary judgment this is referred to as specifc performance)
Court Decision
In this case, the Court found that the parties had entered
into an enforceable contract for the sale of the property to the
plaintiff when they signed the binder. The binder unambiguously
stated: “This agreement is to be binding and remain in full force
unless or until the same is replaced or superseded by a further
and more complete agreement between the parties hereto”.
Under the binder the Buyer is to pay a down payment upon
signing a contract of sale. However signing a sales contract
was a condition which was never met and as a result Plaintiff’s
obligation to pay the down payment never became due.
Defendant also claimed that Plaintiff repudiated the agreement
with respect to the mortgage condition clause when Buyer sought
a mortgage from a credit union rather than a conventional lending
source as specifed in the binder. The Court held that the party
whose beneft a condition is inserted in an agreement may waive
the condition and accept the performance “as is”. Ultimately,
the Court found under the terms of this clause, the agreement
merely gives the Buyer the option to cancel the Agreement if
he is unable to secure a conventional loan. It does not give
the Seller an option to cancel based on the source of Buyer’s
fnancing. As a result, the Buyer is free to obtain fnancing from
whatever source Buyer chooses.
Specifc Performance
The Court granted specifc performance on the bases of
judicial discretion. Normally courts grant monetary damages
rather than enforcement of the agreement unless the property in
question is considered unique. In the case of real estate specifc
performance is appropriate and the Court ordered specifc
performance stating that in this case it was appropriate because
Buyer was willing to pay not only the sales price but also the sum
necessary to clear the title of the property including all transfer
taxes associated with transferring the property.
Conclusion
If you are selling property, make sure you are able to live with
the terms of not only the Binder Agreement but also the fnal
terms of the sale. In matters involving real estate courts are able
to order the property to be sold in accordance with the terms of
the agreement.
Lisa Hollister is an attorney
practicing in Cincinnati, Ohio.
Questions for Ms. Hollister’s
column can be addressed to
twinbridgefarm@aol.com