Seller unable to provide clear title by close of escrow – can I cancel?

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Seller unable to provide clear title by close of escrow – can I cancel?

VA REO property in California but under VA specific agreement
with no clause for buyer to rescind. Seller unable to close
after all documents were signed by buyer and full payment
made. Seller says their attorneys discovered some title issue
and need more time to resolve beyond the agreed upon COE date.
Can I cancel and get full refund?

Asked on December 30, 2017 under Real Estate Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

There does not have to be a specific cancellation or recission agreement: the sellers will be in violation of the contract of sale if they cannot provide clean title at closing, and when one party breaches the contract, the other party has the right to terminate. There is no need for a cancellation clause, when the law itself says that a material (important) breach of contract allows termination.
That said, the law expects a certain amount of flexibility and pragmatism, and tends not to allow termination if the problem can and likely will be resolved shortly after the original closing date. (If the problem can be readily or quickly fixed or "cured," it is not "material.") The best way to proceed and secure your rights is to set a new date in writing (maybe two weeks further off than the original closing date), and also in writing to state that "time is of the essence" to close by that date--in support of that, cite any issues, costs, etc. you are facing (e.g. if you are moving, having to pay for two homes at once due to the delay). In that writing also indicate that if you cannot close at that time, the sellers will be in breach of contract, you will consider the contract as terminated by their breach, and will require your deposit back and may take other legal action as permitted by law. By doing this, you will have put them on record of the need to resolve the issue and a firm, but reasonable, time frame to do so, and will therefore be on firmer grounds to declare that their breach of the amended date is indeed material, thereby warranting termination.
In the letter, you can also layout the additional costs the extra time will impose on you and demand that the seller agree in advance to pay them or else that if the seller does not wish to bear those costs, they may terminate the contract now. Such costs would include the carrying costs for an additional location, if you will be carrying two places at once, etc.


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