Your Lease Should Be in Writing, Whether That’s Required by Law or Not
Whether you’re the property owner or the tenant, your lease should be in writing whether the property is commercial or residential. In some circumstances, it must be in writing to be legally enforceable. Oral contracts or contracts that can be inferred through one or both parties’ actions present more uncertainty and are generally more difficult to enforce than if the lease is written.
Whether you’ll be occupying the space or you own it, residential or commercial, Anthony Burton can help you review a proposed lease or draw up a new one. He also helps clients with lease terms parties agreed upon in the past but are currently causing conflict between the parties. If you’d like legal help with a lease, contact us now.
With Some Exceptions, Verbal Leases are Enforceable, Though Not a Good Idea
Unless there’s an exception in the law, a verbal lease agreement could be enforceable. One important exception is in California’s Statute of Frauds, which states a lease for more than a year must be in writing. The legislature’s goal is to have some contracts in writing to reduce the chances of fraud by one party on the other. A month-to-month lease need not be in writing, but there are disadvantages to a ‘he said – she said’ handshake lease.
Are the risks of a verbal lease for a year or less worth it? Here are reasons why your lease should be written, even when it’s not required by California law:
- There’s proof of an agreement: What’s to stop one party from falsely denying a verbal agreement was reached? Not much, unless there were reliable witnesses there at the time who remember what was said. The chances of someone backing out of a verbal deal are much greater than when the lease is written and signed (though that’s not a guaranty it won’t happen). If the issue goes to court, the written lease would have to be authenticated to be used as evidence, but that process should be far simpler than contradictory testimony by the parties about who said what to whom
- The terms of the agreement are set: The parties’ rights and responsibilities should literally be in black and white on the printed page. With a verbal lease, even if the parties agree there is one, they can differ on their memories of what was agreed upon. A tenant may claim a landlord stated they would do much more than what’s actually been performed. A property owner could claim a tenant is violating the lease by doing, or not doing, various things that were agreed on
- Tenants and landlords should think more about what they want and need when there’s a written lease: When there’s a draft lease, both parties should review it, and decide what’s acceptable and what’s not. They should think about whether they want terms changed, removed, or new ones added. This is much easier when the language is written on paper compared to a back and forth conversation
The Exceptions to the Exception
If you and the other party agree to a verbal lease longer than a year, it still may be enforceable under limited circumstances.
- Partial performance
A court may enforce an otherwise unenforceable verbal lease if there’s enough evidence of partial performance. If either side’s actions clearly refer or relate to the lease (like the tenant moving in and paying rent or the landlord making improvements to the space), a judge may decide that this verbal lease is at least partially enforceable and may order damages be paid by the breaching party to the one who’s harmed. The judge should make the decision on the fairness, or equity, of the situation, given the evidence.
- Promissory estoppel
This is a similar approach to enforcing an otherwise unenforceable lease based on equity. If a verbal lease is agreed upon and:
- One party starts to incur costs to fulfill their obligations under the lease
- The other party knew of the agreement and that costs were being paid
- The other party can’t back out and use the Statute of Frauds as an excuse to not comply with the lease’s terms
The party trying to enforce the agreement (let’s say the tenant) would need to prove:
- The landlord made a clear and definite offer
- There was a reasonable expectation by the landlord the tenant would rely on the offer
- That reasonable reliance took place (rent was paid, the tenant rented a truck to move his belongings, he informed his current landlord he’s leaving)
- There was detrimental reliance by the tenant (his current landlord doesn’t want him back and he lost money because he relied upon the landlord’s agreement)
We’re Here to Help
Whether you’re a tenant or property owner, the issue is residential or commercial property, whether you want to enforce a verbal or written lease or feel it’s invalid, Anthony Burton may be able to help. These cases are driven by the facts of the situation, which may or may not be favorable to your position.
If you have questions about property leases, call us at (949) 244-4207 or fill out our online contact form today. We can talk about your situation, how California law may apply, and what you should do next.
