Real estate lawsuits involve a number of possible legal causes of action, including breach of contract, specific performance, partition, breach of fiduciary duty, real estate fraud, quiet title and boundary disputes, among others. How do you know which causes of action are applicable to your real estate lawsuit and what do these different legal terms actually mean?
One of the most common causes of action in a real estate lawsuit, both in California and nationwide, is breach of contract. Oftentimes two parties will have either a written or oral agreement that governs their business dealings together. The contract can include a purchase and sale agreement, a lease, a partnership agreement, an option or any other agreement between one or more parties where each party has made promises to the other. In a breach of contract action the plaintiff must establish that it performed its side of the agreement (or was excused from doing so) but that the defendant did not. The plaintiff is entitled to recover any damages it suffered. This is probably the most common cause of action in real estate litigation.
Specific performance is often used in conjunction with a breach of contract claim. While a breach of contract action entitles the suing party to damages, specific performance asks the court to force the other party to actually perform what it had promised to perform. This is because the law presumes that real property is unique and damages are not sufficient to make a party whole. For example, in a purchase and sale agreement, if a party enters into a contract but later refuses to sell the property, the buyer can seek an order from the court compelling the seller to go through with the transaction.
Partition is a lawsuit among co-owners of property. Partition does not necessarily rest on an allegation that a party did something wrong. It simply allows for co-owners of a property to disengage from each other, either through a buy-out or the sale of the property. Partition actions are usually accompanied by a request for an accounting of how the proceeds from the property have been spent. The court will typically order an accounting to figure out if one owner has contributed or received more than another party so that they can be made equal. If the parties are unable to reach an agreement for a buy-out or sale of the property, the court can also order the property sold and the proceeds distributed equally among the owners.
While partition applies to co-owners of a property, breach of contract and breach of fiduciary duty are used in real estate partnership lawsuits. Oftentimes property is held in a partnership or limited liability company. The partners (or ‘members’ in a LLC) may have a partnership agreement or, for the LLC, Operating Agreement. A breach of the partnership agreement is a breach of contract. Because partners owe each other certain heightened duties, a breach of fiduciary duty cause of action is also common in partnership disputes. For example a partner who steals money from the partnership or who diverts the best real estate deals or tenants to himself or his other properties without disclosing it to his partners could be liable for a breach of fiduciary duty.
Real estate fraud applies when the other party has made a misrepresentation to you, you have reasonably relied on that misrepresentation and you were damaged by it. In a real estate case this can involve a seller who provides a buyer with false financial information or conceals a material defect in the property. In addition to compensatory damages, a fraud cause of action allows the plaintiff to seek punitive damages—damages meant to punish the defendant for committing the fraud.
Quiet title is used in real estate lawsuits to settle disputes over who owns a parcel of land. Whenever there is a dispute over property ownership, a quiet title is usually appropriate. Quiet title actions can also be used to correct problems in the chain of title even if no one is currently contesting the ownership of the property. This occurs when the historical chain of title is not complete.
Boundary disputes are just that—lawsuits arising over misunderstandings between neighboring property owners over where the boundary lines are and who is entitled to use a certain piece of the land. Boundary disputes can be settled by a quiet title claim.
Real estate litigation can be a complex field. Additional causes of action and remedies may be applicable to your situation. States like California have additional statutes and laws which apply specifically to real estate transactions and real estate lawsuits. However, this primer should help you understand what your real estate attorney is talking about when you discuss your lawsuit.