No general duty owed to holder of option to purchase

Facts: A seller held eight parcels of land, two of which were sold to a buyer. The buyer also had the option to purchase the remaining six parcels of land within two years. During these two years, the seller defaulted on a loan secured by the parcels subject to the buyer’s option to purchase. Under the loan workout agreement with the seller’s lender, the lender was granted an option to purchase the parcels if the buyer did not timely exercise his options.

Claim: The buyer sought money damages from the seller’s real estate agent, claiming he breached his general duty of care to prevent the seller from granting the lender an option to purchase which clouded the title of the parcels, undermining the buyer’s option to purchase.

Counter claim: The seller’s agent claimed he owed no duty to the buyer since the buyer had no interest in the property as he had not yet exercised his option to purchase.

Holding: A California appeals court held the buyer was not entitled to money damages, since the buyer had no ownership rights in the property as an option to purchase is merely an offer to sell at a later date, and thus the seller’s agent had no duty to the buyer. [Scott Cyr v. Dwayne McGoveran (April 18, 2012) 139 CA3rd 753]

Credit given to the first tuesday Journal Online — P.O. Box 5707, Riverside, CA 92517.

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