Real estate transactions represent some of the largest financial commitments most individuals and businesses will ever make. When something goes wrong with a purchase or sale, one potential remedy is rescission, the legal process of unwinding the transaction and restoring both parties to the position they were in before the contract was formed. Understanding when rescission is available under Nebraska law and what the process entails is important for buyers and sellers navigating disputes over real property.
What Is Rescission?
Rescission is a remedy that treats a contract as though it never existed. Rather than seeking money damages for breach, the party seeking rescission asks to have the contract canceled and to have any consideration exchanged returned. In the real estate context, this typically means returning the property to the seller and recovering the purchase price paid by the buyer, along with any other consideration exchanged.
Rescission differs from a simple mutual agreement to cancel a contract. When parties agree to cancel a real estate purchase agreement before closing, that is typically characterized as a mutual rescission or termination. Rescission as a legal remedy is generally sought when one party contends that there are grounds that entitle them to void the contract over the other party's objection.
Grounds for Rescission in Nebraska Real Estate Transactions
Nebraska courts recognize several grounds on which a party may seek rescission of a real estate contract:
Rescission is not simply a buyer's remorse remedy. Courts require that the party seeking rescission demonstrate legitimate legal grounds. Acting promptly and consulting an attorney as soon as problems are discovered is essential to preserving the right to rescission.
Nebraska's Seller Disclosure Requirements
Nebraska requires sellers of residential real property to provide a property condition disclosure statement to prospective buyers. This disclosure must cover a range of material facts about the property's condition, including structural issues, water damage, environmental hazards, and known defects in major systems. A seller who fails to disclose known material defects may face liability for misrepresentation, which could support a rescission claim by the buyer.
It is important to note that the disclosure requirements apply to sellers' actual knowledge. A seller is not required to guarantee the accuracy of the disclosure with respect to matters they did not know about, though buyers who conduct a thorough inspection and review of the property take on certain risks of discovering unknown conditions after closing.
The Election of Remedies
A party who discovers grounds for rescission generally must make an election of remedies. They may seek to rescind the contract, or they may instead affirm the contract and seek damages for the breach or misrepresentation. This is an important tactical decision that should be made with the guidance of experienced legal counsel. Affirming the contract by continuing to perform after discovering grounds for rescission can waive the right to seek rescission later.
Prompt Action Is Essential
Delay in pursuing rescission can be fatal to the claim. Nebraska courts generally require the party seeking rescission to act promptly after discovering the grounds for it. An unreasonable delay, known as laches, can bar a rescission claim even if valid grounds exist. Additionally, if the plaintiff has substantially performed under the contract or if third-party rights have intervened, a court may refuse to grant rescission and award monetary damages instead.
If you are involved in a Nebraska real estate transaction that has gone wrong and are considering whether rescission may be available to you, the attorneys at Horgan Law Firm can analyze your situation and help you understand your legal options. Contact us to schedule a consultation.
