Legal Question in Real Estate Law in California

Re: Sellers held hostage by buyer

An attorney knows better than to guarantee any particular result at trial, but I can tell you the buyer has a good shot. If he can show he was ready, willing and able to perform at time of trial and that the seller breached the contract, he is in a good position. The land could just as easily have gone down in value, so the fact that it increased in value is not a good defense for the seller. Also, the seller should not have entered into a contract to do the lot split unless he had a good understanding of what that would cost and was prepared to pay it. If the new buyer knew about the still-open escrow to the original buyer, he can be found culpable too; on the other hand, if he had no knowledge, he may be a "BFP". You need to take the actual documents to a real estate attorney for review and advice.

Re: Sellers held hostage by buyer

It isn't at all unusual to have long escrows when the buyer conditions his willingness to buy on things that (predictably) will take a long time, such as obtaining permits for a non-conforming use or approval for a lot split.

It's also a sad truth that many California counties are opposed to development and take a semi-legal approach to slowing it by grossly under-staffing their departments that process lot splits and permits.

Based only on a general appreciation of what went on here, my gut feeling is that the would-be buyer has the upper hand in any litigation.

One cannot terminate a real-estate transaction by sending "cancellation papers" to the escrow holder -- the escrow holder must follow the joint instructions given at the outset. Escrow doesn't know and will not take the risk of trying to determine whether you are justified. They need instructions from all parties to cancel and refund, or a court order.

As an impartial observer, I would say that the would-be subdivider/seller was a bit naive and the would-be buyer pursued the deal in a professional manner, and is probably entitled to prevail in a trial.

However, the scales could tip the other way on the basis of relatively minor things not netioned in your discussion of the facts, such as limitations on the time for completing the lot split (express or implied), and other express or implied terms of the agreement that tied up the land in favor of the would-be buyer.

Finally, there is either an inaccuracy or a missing fact in the information about the offered first right of refusal to buy the entire parcel and the failure to respond. A party offered a first right of refusal doesn't have to respond; failure to respond is the legal equivalent of a rejection (usually).

So, in sum, the conflicts here must be set forth in much greater detail before an attorney can give useful advice, but on the thumbnail decription given, I think "your friend" is likely to lose in court. 70% likely, maybe.