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Appellate Division allows claimant a new hearing to seek specific performance of a real estate contract, potential divestment of a third party buyer

The Appellate Division has recently overturned a Chancery Court decision denying a claimants Order to Show Cause (“OSC”) in Hudson County. This noteworthy decision, Siland v. Crandon, Docket No. A-3023-19 (decided March 19, 2021), touches on legal principles concerning specific performance of real estate agreements, bona fide purchasers and even due process rights. In short, the court ordered a new hearing on the order to show cause due to multiple errors by the lower Chancery Court.

The plaintiff in this case was the presumptive grantee of residential property in New Jersey. For over ten years, this individual resided on the property, made improvements, paid taxes and paid installment payments towards the ultimate purchase of the property subject to an agreement with the owner. Yet, in September 2019, the owner placed plaintiff on notice that the property would be listed for sale and by that December, the owner contracted for the sale of the property to a third party.

Plaintiff filed an OSC seeking the following injunctive relief as to the property owner: specific enforcement of the agreement, imposition of a lien on the property and an injunction against the sale of the property to a third party. The lower court denied the requested relief and dismissed plaintiff’s complaint.

According to the Appellate Division, the basis for the lower court’s analysis of the record (via application of the Crowe. v. De Gioia factors used to evaluate OSC applications) was in error for the following reasons:

  1. The lower court erroneously determined that the plaintiff had an adequate remedy through law via monetary damages. However, the court ignored the presumption that specific performance is the appropriate remedy for a seller’s breach of contract to sell real property, due to the unique character of realty.

  1. The lower court erred by declaring the third-party buyer a bona fide purchaser. Plaintiff had field a lis pendens twelve days before the third party closed on the property and consequently, that buyer should have known of plaintiff’s title interest. Therefore, the court erred in concluding that divestment of the property by the third party would be inequitable.

  1. The lower court’s dismissal of plaintiff’s complaint controverted the principles of due process because neither party sought summary judgment disposition of the action, nor was plaintiff on notice that his complaint stood to be dismissed. The court placed its oral decision on the record without appearance of the parties, who were not provided proper notice and opportunity to be heard.

The Appellate Division also spoke to a general failure by the lower court to consider the totality of the circumstances; specifically, that plaintiff dedicated ten years of his time and resources to his home, and that defendant property owner provided insufficient evidence to support his assertion that plaintiff breached the contract and was no longer entitled to his rights thereunder.

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