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Is a “Handshake” or Oral Agreement for Real Estate in California Enforceable?

Real estate is big business in California – and, for many individuals and families, the largest financial transactions of their lives – and so whether the agreements that people make with regard to real estate purchases and even commercial or residential leases can have huge financial implications for both sides. And while most parties expect to eventually get their agreements for a purchase or lease in writing, it is often the case that a buyer and seller (or a landlord and tenant) reach a “handshake” or oral agreement on the spot, with the plans to create a written document later. With real estate sales, this would come in the form of a purchase and sale agreement, and, with landlord/tenant agreements, a written lease.

 

But, in some cases, one party decides to back out before the purchase/sale agreement or lease is ever created, and, in more rare cases, one party moves in without there ever being a written agreement. When things go south, the question then becomes whether such handshake agreements are enforceable.

California’s Statute of Frauds and Real Estate Purchases and Leases

The “Statute of Frauds” may sound like an archaic law about, well, fraud, but it is actually the law which governs the types of contracts that must be in writing in order for a court to enforce them. The default rule is that handshake/oral agreements are indeed enforceable in court (although proving their existence creates a challenge for the party seeking enforcement), but the California Statute of Frauds requires that certain types of contracts be in writing for a court to enforce them, even if both parties agree that an oral agreement was made.

 

The two types of contracts listed in California’s Statute of Frauds that are relevant here are included at Cal. Civ. Code 1624(3), which states that “An agreement for the leasing for a longer period than one year, or for the sale of real property” is invalid unless made in writing.

 

Thus, any contract for the sale of a building or land must be in writing to be enforced. Likewise, a lease for more than one year must also be in writing to be enforceable, but oral agreements for leases that are a year or less do not have be in writing.

 

The writing itself should be signed by the party against whom enforcement of the contract is being sought (meaning the other party you are trying to hold to the contract) and should include basic facts about the contract, such as the address of the property in question.

 

Speak to a real estate litigation attorney for further insight and counsel with regard to your specific situation.

Contact the Real Estate Litigation Attorneys at Wagenseller Law Firm

At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. Contact Wagenseller Law Firm today to schedule a consultation to discuss your real estate matter.

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