Mark B. Kleinfeld Commercial Litigation Law Blog on Lawyers.com

In a recent opinion, the Florida Fourth District Court of Appeal held that a buyer is not required to file a lis pendens (recorded notice of pending litigation against a property)  in connection with a suit for specific performance and that this remedy is available to the buyer even if his seller deeds the property to another buyer before the suit is filed.

In Schachter v. Krzynowek, Case No. 4D06-2266 issued June 13, 2007, Krzynowek as seller and Schachter as buyer entered into a contract for sale and purchase of real property, which provided that the Buyer’s exclusive remedy for a breach by the Seller was return of the deposit or the right of specific performance. Prior to the scheduled closing date, the Seller gave written notice of termination of the contract. The Buyer continued to prepare for closing  and eventually notified the Seller that the Seller was acting in bad faith in order to sell to another buyer for a higher price. The Buyer’s letter stated that he was ready, willing and able to close and would exercise the right of specific performance if the closing was frustrated by the Seller. No closing occurred. The Seller sold the property to another buyer.

 The Buyer sued for specific performance, but did not file a notice of lis pendens. The appellate court reversed the trial court’s summary judgment in favor of the Seller, holding that filing of a lis pendens is a tactical decision, and that the Seller cannot frustrate the Buyer’s specific performance remedy by selling the property to another. The court opined that the lis pendens is a notice document for other persons dealing with the subject property, and the Buyer was only suing the Seller and not the subsequent purchaser. Even though the Buyer agreed that his exclusive remedies were return of deposit or specific performance, the court held that, where a breach is followed by subsequent sale of the property, the Buyer’s remedy is frustrated and he may claim the profits from the subsequent sale as damages.

 It should be noted that, under Florida law (as mentioned in the opinion), the Buyer was subject to a one year statute of limitation on the specific performance claim. Under Florida law, a party filing a notice of lis pendens can be required to post a bond in favor of the other party; the amount of the bond is set by the court after the lis pendens is filed. The bond involves a premium cost to obtain the bond and a contingent liability depending upon the outcome of the suit, which are factors in the “tactical” aspect of lis pendens practice mentioned in the opinion. The opinion is available for your review at http://www.4dca.org/June2007/06-13-07/4D06-2266.op.pdf