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Writer's pictureTiffany Tillema

Termination for Convenience

Residential


Have you ever just clicked the accept button on the terms and conditions to access a web page? Did you read them before accepting them? Most people do not; they assume what those terms are and accept them anyway. What about contracts? Do you read through them before signing? Do you feel like you always know the agreement's terms and sign them? Many people do just that. They skim the contract and sign it thinking it will protect them from anything going wrong. Not reading and understanding their contract has caused a family in Texas to lose their home recently.


If you get anything from this as a homeowner or a sub-contractor, it is always read the contract. If you do not understand the contract, ask questions. Better yet, have a construction attorney review it and suggest changes. You are not obligated to sign a contract you are not comfortable with and can also request changes. Paying an attorney a few hundred dollars to review and make any changes could save you thousands of dollars in the long run.



One of the many things you should be looking for is a "termination for convenience" clause. Those three words can ruin your life for a long time and it is 100% legal!


Recently a couple in Texas lost their home to the termination clause (sometimes called no-fault termination, or cancel for convenience). Here is how it happened. They contracted a builder to build their dream home in 2020. They went through the builder to finance the home. This is common practice and is often easier and more convenient than financing through a bank. The contract was signed and the exciting journey to homeownership began.


There were a few small glitches that usually happen in every build. Then a few months in, the builder stopped production. The family was reminded they needed to sell their current home before the new one was finished. To start the build back up they had to sell their home. So they put the home on the market which sold in less than a week. They rented the current home from the buyer with the move-out date set for the closing date on the new home. The first closing date came and went so they had to move into an Air BNB. Finally, after 16 months they were informed they would be able to close.


Then it happened, only six days before closing they get the call. The builder decided to back out. They now longer had a home to go to. Although they did get their escrow back they were not reimbursed for all the rent payments they made after the builder forced them to sell the old home or any of the other expenses in the 16 months of building what they thought was their forever home. Instead they get only $500 for their trouble and a "sorry about your bad luck" from the builder.


The homeowners did nothing wrong. They complied with all of the builders requests including selling the only home they had. With three little words tucked in the middle of the contract, The builder was able to back out of the contract for no other reason than they wanted to. Although the builder never stated a reason, during the build the housing market exploded with homes often doubling in price, the builder took this family's home and immediately put it up for sale at $300,000 MORE than the house was originally contracted for! I've spoken with a few construction attorneys that said this was perfectly legal and although the family has filed a lawsuit most likely they will lose. I will be watching this case closely.


What do you think, Even though it was legal, was it ethical?


Should the builder have reimbursed the family's expenses?


Should the "Termination for convenience" laws change?


Let me know your thoughts in the comments!



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