Oral contract for sale of real property is unenforceable
Q. My neighbor posted a “for sale by owner” sign on his property. After I saw the sign, I went to speak with him. He and I agreed on a price and I hired a lawyer to represent me in the purchase of his house. My lawyer called me and said that my neighbor did not return his calls until today. The neighbor told him that he entered into a contract to sell the house to someone else. How could my neighbor do that when he already agreed to sell the house to me?
A. The neighbor could – and he did – and there is nothing you can do.
While contracts concerning personal property (movable, tangible (touchable) items) do not have to be in writing to be enforceable, it is always a good idea to reduce verbal agreements to writing so there is no misunderstanding or misconception concerning the transaction. It is much easier to enforce a written contract concerning personal property than an oral contract.
On the other hand, transactions concerning the sale or transfer of real property (generally, land or buildings attached to land) must be in writing. Verbal agreements concerning transfer of real estate are barred by the Statute of Frauds, in New York enacted as General Obligations Law § 5-703: Conveyances and contracts concerning real property required to be in writing.
Even had your neighbor’s lawyer prepared a contract of sale (as the seller’s attorney does in a standard transaction) and had you signed the contract and provided a down payment as mandated by the contract, the neighbor still could have sold the house to someone else. Until all parties (including the seller) sign a written real property contract of sale, there is no binding contract and no ramifications for either party if the contract is not fully executed. The seller’s attorney would just have returned your down payment check to you.
The purpose of the writing requirement is to prevent fraudulent transfers, as the name of the law suggests. There is nothing you can do here to prevent your neighbor’s sale of his home to anyone he chooses.
W. Zehava Schechter, Esq. specializes in estate planning, administration and litigation; real estate law; and contracts and business law. Her law practice is located on Long Island. Please send your comments to SchechterLaw@gmail.com. Her podcast, the LI Law Podcast, may be downloaded on itunes, Google Play, Spotify, Stitcher, or wherever you get your podcasts. The podcast website is: https://lilawpodcast.podbean.com.
No column is a substitute for competent legal advice. Please consult with the attorney of your choice concerning specific legal questions you may have.