Sometimes after a purchase agreement is signed, one of the parties elects to cancel the agreement or is forced to cancel the agreement due to the breach of the other party.

There a few ways in Minnesota to cancel a real estate purchase agreement: voluntary cancellation, statutory cancellation, and judicial cancellation.

Voluntary Cancellation

This is obviously the easiest and least stressful way to cancel a real estate purchase agreement. Most purchase agreements have defined terms that allow the buyer to cancel the agreement and have the earnest money returned. In general, cancellations in real estate transactions usually deal with a failed contingency, such as a failed inspection or failed financing, or one of the parties choosing to back out and breaching the agreement altogether. The caveat, however, is that both the seller and the buyer have to sign the “Cancellation of Purchase Agreement” form for the voluntary cancellation to be effective.

Statutory Cancellation

If the seller refuses to sign the “Cancellation of Purchase Agreement” form, then the buyer can use Minnesota’s statutory cancellation process. There are a few statutes that can be used as options to cancel the purchase agreement.

Statutory cancellation under Minnesota Statute section 559.21:

This is viewed as the “traditional” way to cancel purchase agreements. Generally, a cancellation under this provision requires proper notice served on the other party and the termination is effective with 30 days notice and failure to cure, unless the parties have agreed to a longer period.

Declaratory cancellation under Minnesota Statute section 559.217, subdivision 4 (applies to residential property only):

This occurs when an unfulfilled condition exists after the date specified for fulfillment in the terms of the purchase agreement, which by the terms of the purchase agreement cancels the purchase agreement. Similar to the statutory cancellation under section 559.21, notice must be served on the other party and any party holding the earnest money. The agreement is cancelled if, within 15 days, the party upon whom the notice is served does not get a court order suspending the cancellation. There is no right to satisfy the contingency.

Cancellation with right to cure under Minnesota Statute section 559.217, subdivision 3 (applies to residential property only):

Under this section, one can be sued where there has been a default or an unfulfilled condition exists, but the terms of the purchase agreement do not provide for automatic cancellation. Once notice is served, the contract is canceled if the party upon whom notice is served does not, within 15 days, either (a) comply with the conditions in default or complete the unfulfilled conditions, including, if applicable, completion of the purchase or sale, or (b) secure a court order suspending cancellation.

Judicial Cancellation

If all else fails, a court can make a determination that a contract is cancelled. This is the most burdensome of all of the options because it requires an action be brought in court.

Being familiar as a buyer and a seller of these statutory cancellation procedures is crucial since there is not a lot of time to respond to a notice served.