How the Statute of Frauds Applies Real Estate Transactions in NYC

Although you may be able to enforce some verbal agreements (a/k/a agreements not reduced to writing), you should be aware that the statute of frauds is an important law that requires certain types of contracts to be in writing. Don’t be caught off guard with an unenforceable agreement. Read more to learn how to ensure your agreement is enforceable.

What is the Statute of Frauds?

Believe it or not, a gentleman’s agreement–agreeing to something with a handshake or with verbal confirmation–can create an enforceable contract in the state of New York. If, for example, you verbally agree to purchase some of your coworker’s office furniture, you may find that your coworker can enforce the deal if you decide to back out at the last minute. Not all verbal contracts are enforceable, though. An important law called the “statute of frauds” requires that certain contracts must always be reduced to writing, otherwise the contract will be void. In New York, the statute of frauds can be found in New York Consolidated Laws, GOB § 5-703. 

Essentially, under the statute of frauds, if the contract falls into one of the categories listed in the statute, then the contract must be in writing and meet the requirements of the statute, or else it will be unenforceable. For example, a verbal agreement to purchase some furniture from your neighbor could absolutely be legally binding in New York. Meaning, if you do not pay the neighbor for the furniture, the neighbor may have a legal right to enforce the agreement. 

How does the statute of frauds affect real estate in New York? Can a verbal agreement to purchase a home be legally binding in New York? A verbal agreement to purchase a house would not be legally binding in New York because contracts for real estate must be in writing in New York, according to the statute of frauds. The requirement that real estate contracts be in writing can be helpful and hurtful, depending on what side of a real estate transaction you are on. For example, a seller typically is out of luck if he or she wants to force a buyer to follow through on a verbal contract to purchase a home. Alternatively, the buyer who wants to back out of a verbal agreement may find New York’s law very beneficial. 

Below you can read more about what other contracts are required to be in writing under New York’s statute of frauds. Just keep in mind that contracts generally can be stressful and confusing. That is why we are here to help. If you ever have any real estate contract or other contract needs, contact the Law Office of Yuriy Moshes at any time. We will be happy to help. 

What Agreements Should Be in Writings?

Below, you will find a list of the contracts that must be in writing in order to be effective under the New York State statute of frauds: 

1. Agreements that are, per their terms, not to be performed within a year of it’s making or within the lifetime of one of the parties,
2. An agreement to sell real property, other than a lease for less than a year. 
3. Agreements that are promises to answer for the “debt, default, or miscarriage of another person.” One of example of this would be an agreement to answer for the debts of another person,
4. Agreements made in consideration of marriage. Mutual promises to marry are excepted,
5. New or subsequent agreements to pay a debt that was previously discharged in bankruptcy,
6. Agreements to assign the benefits of a life, health or accident insurance policy,
7. Agreements to name a beneficiary to a life, health or accident insurance policy,
8. Agreements to pay for negotiation services or representation in the buying, selling, or renting of real estate or a business opportunity.

Because of New York’s statute of frauds, any agreement that deals with the items listed above must be in writing to be enforceable. This also means that a lot of other agreements are completely enforceable even if they are not in writing! You should always be aware that your conversations with other people can create legally binding contracts, especially when you are discussing business matters. 

Application to Leases

If the lease is over a year, then it must be in writing. Notably, however, a verbal agreement to lease property can be legally enforceable if the lease agreement is shorter than a year. So, if a landlord and tenant reach a verbal agreement to rent property for less than a year, the lease could be completely enforceable and the tenant may end up owing the landlord rent, even if the tenant does not follow through on the lease. 

Statute of Frauds Exceptions

The main exception to the statute of frauds in New York is called the “part performance” exception. Essentially, the two terms refer to the same thing. Part performance refers to when one party relies on an agreement and takes action to perform his or her part of the agreement. For example, Joe agrees to buy 10,000 dollars worth of products from Jim, and Jim subsequently makes the effort to deliver the products to Joe. In this scenario, Joe may end up owing Jim for the products, even if Joe and Jim do not have a written agreement for the products. A court would likely say that Jim performed his part of the deal, at least in part, in reliance on the agreement that Joe and Jim had. The same scenario can apply in other transactions, too. 

Contact a New York Real Estate Attorney with Experience in the Statute of Frauds

The important takeaway is that sometimes contracts can be formed very easily and even without the intention of creating a contract. Additionally, regardless of whether contracts are verbal or written, contracts can be complicated and create a lot of headaches. This is especially true when real estate is involved. If you are considering any kind of real estate transaction, having a lawyer on your side can be critical.

At the Law Offices of Yuriy Moshes, we know real estate law and we know how to protect our clients and how to cater to our clients’ needs. We are here to help you. Reach out to us at any time to see how we can be of assistance.