Under the Statute of Frauds, a land sale agreement must both be in writing and be signed by the person against whom it is being enforced, typically the seller.
Usually this is not a problem. But, problems can easily arise when friends who trust one another make oral land sale agreements or make oral modifications to existing written land sale agreements.
Such situations can fall apart when the seller dies before the transfer of title occurs at which time others less knowledgeable and often less friendly to the buyer step in to administer the now deceased seller’s estate.
Consider, for example, a real property owner who agrees to sell land with buildings in need of much repair to his friend, the buyer, under an installment purchase agreement with a six year term and balloon payment. The original agreement is in writing and is signed by both parties.
However, some years into the purchase agreement, after making many payments and substantial property improvements the buyer tells his friend the seller that he is in financial difficulty making his installment payments and doubts being able to make the upcoming balloon payment.
He requests that they extend the term (i.e., balloon payment date) and that the seller recommit to transferring title into the buyer’s name.
The owner agrees to extend the sale date on condition that the buyer makes higher installment payments.
Six years go by, during which the buyer faithfully makes his installment payment and continues to make substantial improvements to the residence on the real property.
The buyer keeps asking and the seller keeps promising to transfer the title into the buyer’s name.
Unfortunately the seller dies first and title remains in the seller’s name and his estate goes into a probate. Does the buyer have any legal recourse?
Under the Law of Equity, yes. Here the seller can petition the probate court to compel the estate to complete the sale and transfer title to the real property.
But what about the Statute of Frauds? Doesn’t it prevent the enforcement of the oral modification that extended the written contract’s sale date?
Fortunately, California’s probate courts can apply the Law of Equity (that seeks fairness) to fashion equitable remedies where enforcement of the Statute of Frauds would have unconscionable results.
In special circumstances, therefore, the Law of Equity can remove an oral modification from the Statute of Frauds.
Here, given the buyer’s part performance and detrimental reliance on the seller’s promise to extend the original purchase option date and transfer title into his name, the court may prevent the administrator of the deceased seller’s estate from asserting the Statute of Frauds (as a defense to the enforcement of the oral modification).
However, to successfully avail himself of the Law of Equity the buyer must meet his burden of establishing the factual basis for his equitable claims.
In this scenario that means the buyer would need to prove the following factual assertions: (1) that the oral modification to the written sale agreement took occurred; (2) the terms of the oral modification; (3) the amount of his payments; (4) the substantial improvements that the buyer made to the building; and (5) the value of these improvements.
Lastly, if the buyer is unable to make his case for specific performance of the land sale agreement then the court still has the option to award him money for the value of his improvements in order to prevent unjust enrichment to the decedent’s estate.
That is, of course, typically a fallback position and not the buyer’s desired result as the buyer.
Dennis A. Fordham, attorney (LL.M. tax studies), is a State Bar Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. Fordham can be reached by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at 707-263-3235. Visit his Web site at www.dennisfordhamlaw.com .
Estate Planning: Oral land sale agreements
- Dennis Fordham
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