July 11, 2015
The statute of frauds exists in some form in all 50 states as a part of the body of real estate law. It says, in essence, that all promises made for the purchase and sale of real property must be in writing to be enforceable.
Ohio’s version, for example, is in O.R.C. Section 1305.05:
No action shall be brought whereby to charge the defendant … upon a contract or sale of lands, tenements, or hereditaments, or interest in or concerning them, or upon an agreement that is not to be performed within one year from the making thereof; unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or some other person thereunto by him or her lawfully authorized.
In Kentucky, it looks like this at K.R.S. Section 371.010:
No action shall be brought to charge any person:
(6) Upon any contract for the sale of real estate, or any lease thereof for longer than one year;
unless the promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, be in writing and signed by the party to be charged therewith, or by his authorized agent.
Those are two mouthsful, but they in essence say that if you are going to go to Court to enforce a contract for the sale of real estate, or for a tenancy in excess of one year, the promise(s) you want to enforce simply must be in writing and signed by the other party.
In practice, this means at least several things:
1) First, it does not matter if you have it on video tape, audio recording, unsigned emails, or ten witnesses to an oral conversation. If you do not have the promise in writing, it simply — as far as the Court will be concerned — did not happen.
2) Second, it means that every single promise — not just the core promise to sell and buy — must be in writing and signed by the party against whom you want to enforce the contract. So, if a seller makes “side” promises to replace the HVAC system or to give the buyer a credit at the closing, or if the buyer is going to pay extra for early occupancy of the property, these additional promises — all of them — should be memorialized in a written agreement signed by both parties. So, even after a contract is signed, the later agreements — to extend closing dates, make property repairs, or make price concessions at the closing, should be put in writing and signed by the parties to the transaction.
3) Third, lease agreements, residential and commercial, that extend beyond 12 months should be reduced to writing as well, and signed by all parties. Again, all promises relative to that agreement should be included in that document.
There are historical reasons for this rule, some of them explored and explained here, but suffice it to say that it is the law and no amount of teeth gnashing and wailing after the fact is going to change that analysis .
Buyers, sellers, Realtors, tenants, and lenders should all internalize this concept and make a habit of memorializing the contract terms accurately, and completely, in writing and with signatures of the parties to the contract in order to see contractual obligations through to their conclusion.