Statute of Frauds in Real Estate Transactions

Chances are that you’ve completed a lot of informal transactions. Your friend offers to sell you their old car because your daughter just passed her driver’s test, so you shake hands on it. You may have also sold items on craigslist after a brief conversation over the phone. They meet you, money is exchanged, and that’s it.

While oral contracts are generally enforceable, there are exceptions, especially where real estate transactions are concerned. According to the Texas statute of frauds, certain contracts must be in writing to be enforceable. They are as follows:

  • Contracts that can’t be fulfilled/performed within one year
  • Contracts for the sale of real estate
  • Leases for longer than one year
  • Marriage or cohabitation contracts
  • Loan agreements for more than $50,000
  • Contracts to pay someone else’s debts
  • Certain medical care agreements
  • Contracts for commissions from certain mineral, oil, or gas sales

Homeowners and real estate investors generally understand that a written contract is required when they buy or sell property in Texas. However, when it comes to modifications, amendments, or extensions of a written contract, the question often arises whether the details need to be in writing. For example, if you and a seller have a verbal agreement to move the closing date forward, is it legally binding? 

The answer to this question is generally no, but there may be exceptions.

Exceptions to the Statute of Frauds 

In Texas, an oral contract for the sale of real estate may be exempted from the statute of fraud if the parties have performed the contract to such an extent that its application would defeat its purpose. According to this doctrine, an oral contract for the purchase of real property is enforceable if the purchaser:

  • Pays the consideration;
  • Takes possession of the property; and
  • Makes valuable and permanent upgrades/improvements with the seller’s permission 

An oral contract may also be enforced if failure to do so would clearly make the transaction a fraud on the part of the purchaser. It is important to note that only a jury can decide whether an agreement falls within this partial-performance exception.

Real Estate Transactions Should Always Be in Writing

Even when an aspect of your real estate transaction is exempt from the statute of fraud, it’s usually in your best interests to get it in writing anyway. Litigating these matters is rarely straightforward, and a jury’s interpretation could yield results you don’t expect or want. A Texas real estate lawyer can help you draft, negotiate, or review an agreement that protects the integrity of your transaction, now and in the future.

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