A real estate investor entered into a purchase agreement with an owner to acquire a parcel of real estate. Upon opening escrow, the investor took possession of the property and began renovations but had not made a final determination whether the property would be developed as a single family residence (SFR) or multi-family housing units. Before escrow closed, title to the property was transferred to a substitute seller. The investor then made a demand on the substitute seller to deliver title as agreed by the previous owner. The substitute seller refused to deliver title unless the investor paid a higher purchase price. The investor refused. The investor sought to recover his lost profits for failing to receive title, claiming the substitute seller was liable for the investor’s money losses since the investor’s lost profits were directly related to the substitute seller’s breach of the purchase agreement. The substitute seller claimed he was not liable for the investor’s lost profits since the investor had not determined his final use for the property at the time he entered into the purchase agreement and thus his lost profits were speculative. A California court of appeals held a real estate investor is unable to recover lost profits due to a (substitute) seller’s failure to deliver title as agreed since the investor did not establish his specific plans for the future use of the property at the time he entered into the purchase agreement, rendering his profit estimate conjectural and too speculative to be established. [Greenwich S.F., LLC v. Wong (2010) 190 CA4th 739]

Editor’s note — See first tuesday form 181 — Cancellation Agreement – Release and Waiver of Rights