10
Mar 2016
Contract
Statute of Frauds for Real Estate Transactions in NY: The Basics
By admin

Is a buyer obligated to honor a real estate agreement even if they don’t sign a contract? Usually not, however there are exceptions. Today we’ll explain the NY statute of frauds rules concerning real property and demonstrate an important exception to the rule.

What is a statute of frauds?

The agreement between a real estate buyer and a seller for the transfer or sale of real property is governed by common law. In New York, the statute of frauds require certain contracts to be in writing. Concerning the lease or sale of real property, we’ll take a look at New York Consolidated Laws GOB, § 5-703.

New York Consolidated Laws GOB, § 5-703

Conveyances and Contracts Concerning Real Property Required to be in Writing:

An estate or interest in real property, other than a lease for a term not exceeding one year, cannot be created,
granted, assigned, surrendered or declared, unless by act or operation of law, by a deed or conveyance in writing.

A contract for the leasing for a longer period than one year,  or  for  the  sale of  any  real property, or an interest therein, is void unless the contract or some note or memorandum is in writing.

A contract to devise real property or establish  a  trust  of  real  property is  void unless the contract or  some  note  or  memorandum  thereof  is  in writing.

What constitutes “in writing”?

All “writing” must be subscribed by the party to be charged or by their lawful agent. Contracts don’t need to be exhaustive. All notes and contracts should include a description of the real property or interest, identification of the buyer and seller, purchase price and manner of payment, signature of the party to be charged. Furthermore it has been ruled by the NY Appellate Divisions 2010 decision of Naldi v. Grunberg  that “an electronically memorialized and subscribed contract be given the same legal effect as a contract memorialized and subscribed on paper.”

An Important Exception

It’s important to note that an agreement to buy a piece of property could become binding without a written and signed agreement if the seller has fulfilled his or her part of the contract.

For example:

Thomas and Jimmy enter into an oral contract in which Thomas agrees to sell Jimmy his home for $500,000. Jimmy has a NY title insurance company perform a title search to ensure that the title to the property is free and clear of encumbrances, litigation risks, and other defects. The title is free and clear, and Jimmy decides to continue with the purchase. Thomas has a NY title insurance company prepare a deed of conveyance to transfer title to Jimmy.  Suddenly, Jimmy decides he doesn’t want to purchase the home. He hasn’t signed a contract, so he assumed he will be protected by NY statute of frauds rules. Wrong. Jimmy will have to pay Thomas $500,000 even though the contract was oral. By performing his part of the oral agreement and conveying the title, Thomas made the contract enforceable. 

World Wide Land Transfer is NY title insurance company offering full service Settlement and Escrow services for all forms of real estate transactions. We excel at simple home purchases as well as complex commercial transactions. We began as a PA title company, but quickly expanded our service area across the country. Today we issue NY title insurance, MD title insurance, VA title insurance, FL title insurance, and more.

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