All too frequently, property owners and those dealing with interests in real property do so without properly documenting important aspects of the transaction. In some instances, they use no documentation at all! This is very common when dealing with spouses, family members or other close and trusted individuals. The prevailing thinking in these situations is that the other person or persons can be trusted and thus, no documentation is necessary. Sadly, such situations frequently turn ugly when the parties to the transaction are no longer on good terms such as during a divorce or during disagreements over management and control of the property. Even when a situation is not expected to result in a disagreement or dispute, parties to any transaction involving real property would be better served by documenting the entire transaction, including the understanding and roles of all parties, in writing.
Statute of Frauds
Certain agreements in California are required to be in writing including those which, by their terms, will not be performed within one year, agreements to answer for the debt of another and compensation agreements for real estate brokers.
Agreements to transfer interests in real estate or to lease real property for a period of more than one year must also be in writing to be enforceable. California Civil Code § 1624. Furthermore, interests in real property (outside of estates at will or leases with terms of one year or less) can only be transferred, created, granted or assigned by a written instrument or by operation of law. California Civil Code § 1091; California Code of Civil Procedure § 1971.
These laws and requirements have arisen over many decades based upon experiences in a variety of situations within which the law began to recognize when certain agreements or rights should be properly documented in writing. Such written agreements protect the interests of all parties involved and, in particular, the party who is likely to be deprived of an interest in real property. This is also why the law provides such a strong presumption in favor of real property title holders who are presumed, by the very fact they are on title, to be the owner of full beneficial title to the property. Another party can rebut this presumption only by clear and convincing evidence under California Evidence Code § 662. This evidentiary burden is the highest in California and has been described as one not only having a high probability but also “so clear as to leave no substantial doubt; sufficiently strong to command the unhesitating assent of every reasonable mind.” In re Angelia P. (1981) 28 Cal.3d 908, 919.
While the requirement of a writing documenting a transaction involving real estate or transferring such an interest generally must be met before the rights discussed herein become enforceable, the Statute of Frauds does give way in certain situations where the Courts have determined it would be inequitable.
Exceptions to The Statute of Frauds
The following are exceptions to the Statute of Frauds wherein a party can enforce a right in, or to, real property despite the lack of a written agreement or documentation:
Estoppel: The doctrine of estoppel prevents a party from suffering an unconscionable injury, or to prevent another party from being unjustly enriched, if such a result would occur from failing to enforce an oral agreement that the law requires to be in writing. The elements that need to be shown include (1) a representation or concealment of material facts; (2) made with knowledge, actual or virtual, of the facts; (3) to a party ignorant, actually and permissibly, of the truth; (4) with the intention, actual or virtual, that the ignorant party act on it; and (5) that party was induced to act on it. Joffe v. City of Huntington Park (2011) 201 Cal.App.4th 492.
Full Performance: If the oral agreement is fully performed by the parties outside of, perhaps, one remaining requirement then the party seeking to enforce the agreement can obtain a Court order enforcing the oral agreement.
Partial Performance: A Court can still enforce an oral agreement if one party has performed their part of an oral agreement and the other party’s performance remains due.
Fraud: If a party engages in fraudulent acts and misrepresentations that cause another to fail to perform in conformity with promises made under an oral agreement, that party cannot then rely upon the Statute of Frauds as a defense to enforcement of that oral agreement. Furthermore, If a party engages in fraudulent acts that are designed to prevent an agreement from being reduced to writing, the other party can also seek to enforce the agreement without the bar of the Statute of Frauds.
Get Everything In Writing
While having agreements involving the sale or transfer of real estate interests prevents the Statute of Frauds from being used against a party as a defense, the far better reason to have such matters documented in writing is that when the documents exist, they are very difficult to disprove later. Documents also help to clear up any confusion when competing parties to a dispute are tasked with recalling the details of discussions that may have occurred months, or even years, in the past.
While it may seem that a real estate transaction involving a spouse, family member or even a good friend can be completed without the need to put it in writing, good practice dictates that any real estate transactions or agreements be put in writing. This will ensure that the parties to the transaction are easily identifiable later and that said parties are on the same page about the arrangement before it is finalized. More importantly, this will prevent either party from taking advantage of the other when the terms are clear, in writing and executed by all parties involved in the transaction. Even when it is not legally required, all parties to any real estate transaction should document what the parties intend. It could be the difference between owning a piece of real property and finding out that despite years of living in a piece of property with a spouse or loved one and investing time and energy into the property that you, in fact, have no interest in the property. Such situations are unfortunately very common so when in doubt, put everything in writing!
Please note that this publication is for general information and education purposes only and does not constitute legal advice nor does it form an attorney-client relationship between the author and the reader. Laws concerning the subject matter(s) of this publication are subject to change and thus this publication may not contain complete or accurate information depending upon when the reader reviews it. Before taking any action based upon information or laws discussed in this publication, the reader should consult with an experienced attorney.
