How the Statute of Frauds Applies to Real Estate in California
What is the Statute of Frauds under California Code of Civil Procedure § 1624(a)?
The Statute of Frauds is a legal doctrine providing that certain types of contracts are invalid unless they are produced in writing and signed by the party to be charged. The California Code of Civil Procedure § 1624(a) states, in applicable part:
The following contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent:…
(3) An agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; such an agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent is in writing, subscribed by the party sought to be charged.
(4) An agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate, or to lease real estate for a longer period than one year, or to procure, introduce, or find a purchaser or seller of real estate or a lessee or lessor of real estate where the lease is for a longer period than one year, for compensation or a commission.
(6) An agreement by a purchaser of real property to pay an indebtedness secured by a mortgage or deed of trust upon the property purchased, unless assumption of the indebtedness by the purchaser is specifically provided for in the conveyance of the property.
In other words, contracts that fall under the Statute of Frauds must be signed by the party to be charged. An oral contract, for example, will not suffice. However, as with many legal doctrines, there are exceptions that have been argued by experienced real estate attorneys that may apply in your case.
How the Statute of Frauds Affects Real Estate
The Statute of Frauds only applies to certain types of contracts, including the sale of real property. Leases that are one year or longer in length are also included under the Statute of Frauds. Therefore, contracts regarding the sale of land or leases that are at least one year in length must be written (not oral) and then signed by the party to be charged.
At its core, the Statute of Frauds is meant to protect people against baseless claims by requiring written contract. According to Miller & Starr, the leading authority on California real estate law:
The purpose of the provision of the statute of frauds applicable to brokers and finders agreements is to protect buyers, sellers, lessors, and lessees of real property from unfounded claims by persons who have not been duly authorized to act as an agent for the principal. However, it is also the policy of the law to protect a broker who has been employed properly and has performed services for the principal in good faith.
Miller & Starr, 2 Cal. Real Est. (4th ed.) § 5:6.
Part Performance as Exception to the Statute of Frauds
As we have seen, a real estate contract would not be enforceable under the Statute of Frauds if it was only a verbal contract. However, there are exceptions to this rule. One exception is known as the part performance exception. Part performance allows for a verbal contract to be enforced if one of the parties has partly performed. Parties can then sue for damages even though the Statute of Frauds would apply.
As courts have explained, “where assertion of the statute of frauds would cause unconscionable injury, part performance allows specific enforcement of a contract that lacks the requisite writing. The doctrine most commonly applies in actions involving transfers of real property. (Code Civ. Proc., § 1972, subd. (a) [part performance available to enforce agreement to convey real property absent writing required under § 1971 of same code] Yet, part performance also has been used to enforce other contracts that violate the statute of frauds in Civil Code section 1624(a). In any event, to constitute part performance, the relevant acts either must “unequivocally refer” to the contract, or “clearly relate” to its terms. Such conduct satisfies the evidentiary function of the statute of frauds by confirming that a bargain was in fact reached.
In re Marriage of Benson (2005) 36 Cal. 4th 1096, 1108–09; see Part performance that takes contract outside statute, 2 Cal. Affirmative Def. (2d ed.) § 53:25; Miller & Starr, Agreements required to be in writing—Exception: part performance by the buyer or lessee, 1 Cal. Real Est. (4th ed.) § 1:76; Part Performance – Generally, 35 Cal. Jur. 3d Statute of Frauds § 93.
In most cases, real estate contracts fall under the Statute of Frauds and are required to be in writing. However, if the criteria above have been met, part performance may render a contract enforceable even without the written component. An experienced real estate litigation attorney can help you determine whether the requirements have been met for part performance in a real estate contract.