Most people in the real estate business have heard, or even been a party to a horror story regarding a closing. Thankfully, these horror stories are the exception and not the rule, but one of these is enough to make you question why adults behave so poorly at times. Case and point: KGM Custom Home Builders v. Prosky.
According to Attorney Richard Vetstein who blogged about the case, the Prosky family of Mansfield, Massachusetts agreed to sell 45 acres of developable land to KGM Custom Builders. The sale price hinged on the number of lots KGM could acquire permits for which required them to spend over $300,000 and five years to finally obtain permits to develop 60 residential units.
Well, we change our mind, we don’t want to sell to you
During this time, the Prosky family received a better offer which brought in to question KGM’s calculations of the purchase price. Since the builders had invested so much time and money, they were unwilling to negotiate on the already agreed upon terms, and scheduled a closing. Enter the attorneys.
The Prosky’s attorney told KGM to calculate damages because they no longer wanted to sell, but a closing was still scheduled. On the closing date, the Prosky’s attorney showed up, along with a professional videographer. The attorneys began yelling at each other, and in an extremely childish gesture, KGM’s attorney turned off the electricity to the building, presumably so the videographer would not be able to work, but he was able to capture everything with a battery backup. The Prosky’s attorney refused to release their closing documents and after more shouting, the attorney for KGM left.
After the screaming came the lawsuits
Then the lawsuits began. KGM sued the sellers, and a trial judge ruled in favor of the sellers, calculating the sale price of the land at over $1 million. However, the judge also ruled the sellers had engaged in anticipatory repudiation and gave the buyer the option of continuing with he deal or accepting the liquidated damages.
Damages of nearly $500,000 (in permit costs and attorney fees) were awarded. The sellers decided to appeal. Long story short, the Massachusetts Supreme Judicial Court agreed, but reduced the fee by $120,000 (however, interested accrued will likely cost this much anyway).
The lesson here: be careful what you do and say, no matter what circumstances may appear at a closing, because it could come back and cost you not only a sale, but also, punitive damages and your reputation.