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pharmlaw · Dec 4, 2008, 12:41 PM

The situation is this: two parties (long-time friends) had an agreement that Party A would sell a portion of his property (with an outbuilding) to Party B. The property had not yet been subdivided and Party A (Seller) left it up to Party B to get the county to approve the subdivision. In the meantime, they agreed on a purchase price, determined a monthly payment to be paid for 5 years, at the end of which a balloon payment would be due (to cash out). NOTHING WAS PUT IN WRITING.

Party B expended more than $5,000 in improvements to the property (specific to his use). After 5 years, they still did not have county approval for the subdivision, so Party B just continued to pay each month towards the agreed purchase price. He wrote "mortgage payment" on each check (starting with the first payment)! Now, approx. 8 years later, Party A (and his real estate agent who was involved in the original agreement) deny that he was PURCHASING the property, alleging instead that he was just renting it! (When the power was knocked out in a storm, it was up to Party B to fix it, not Party A!).

Party A has announced that he has a buyer for the property at today's appreciated price. Further, he served Party B with a 20 day notice to vacate. Even if legitimately required to do so, it would be impossible for him to vacate within 20 days.

So, without anything in writing and nothing but parole evidence, what rights or protections does Party B have? Party A has no written rental agreement to terminate and all the evidence (there is more!) circumstantially indicates a purchase situation, not a rental.

What can Party B do? What SHOULD party B do? THANK YOU for your input on this!

JudyKayTee · Dec 4, 2008, 01:14 PM

Originally Posted by pharmlaw

The situation is this: two parties (long-time friends) had an agreement that Party A would sell a portion of his property (with an outbuilding) to Party B. The property had not yet been subdivided and Party A (Seller) left it up to Party B to get the county to approve the subdivision. In the meantime, they agreed on a purchase price, determined a monthly payment to be paid for 5 years, at the end of which a balloon payment would be due (to cash out). NOTHING WAS PUT IN WRITING.

Party B expended more than $5,000 in improvements to the property (specific to his use). After 5 years, they still did not have county approval for the subdivision, so Party B just continued to pay each month towards the agreed purchase price. He wrote "mortgage payment" on each check (starting with the first payment)! Now, approx. 8 years later, Party A (and his real estate agent who was involved in the original agreement) deny that he was PURCHASING the property, alleging instead that he was just renting it! (When the power was knocked out in a storm, it was up to Party B to fix it, not Party A!).

Party A has announced that he has a buyer for the property at today's appreciated price. Further, he served Party B with a 20 day notice to vacate. Even if legitimately required to do so, it would be impossible for him to vacate within 20 days.

So, without anything in writing and nothing but parole evidence, what rights or protections does Party B have? Party A has no written rental agreement to terminate and all the evidence (there is more!) circumstantially indicates a purchase situation, not a rental.

What can Party B do? What SHOULD party B do? THANK YOU for your input on this!

I see a lawsuit - question will be whether any reasonable person would spend money when there was no agreement between the parties, was there a contract and what were the terms?

Of course, to be a valid oral contract both parties have to be in agreement, both must benefit - and it appears that is the case.

I see a lawsuit for damages and costs. Both parties go to Court with proof and a Judge determines what makes sense.

Fr_Chuck · Dec 4, 2008, 02:56 PM

Hire a attorney very quickly.

Trouble that in the US, every state I know of requires property purchases ( not rental) to be in writing, verbal agreement to purchase real estate can not be upheld in court.

So it is possible the court will not reconise their verbal contract as valid since it is for real estate.
*** depends on the state.

JudyKayTee · Dec 4, 2008, 02:58 PM

Originally Posted by Fr_Chuck

Hire a attorney very quickly.

Trouble that in the US, every state I know of requires property purchases ( not rental) to be in writing, verbal agreement to purchase real estate can not be upheld in court.

So it is possible the court will not reconise thier verbal contract as valid since it is for real estate.
*** depends on the state.

Good point - I was looking more at the contract and less at the purpose of the contract.

Wonder what State?

Also wonder if there is some sort of lawsuit for fraud hiding someplace concerning the money already spent - ?

pharmlaw · Dec 4, 2008, 04:30 PM

I agree with both of you. This is in Washington State. The way I see it, we can make a compelling argument that, in no way, was this a rental situation. There are NO indicia of that except monthly payments. But, being real estate, the court still may not require specific performance. Perhaps, alternatively, an action for damages for all the money spent each month plus the money he put into the property. (I am thinking that we would have to show that the monthly payments exceeded the fair rental value of the proerty, though).

Comments?

Originally Posted by JudyKayTee

Good point - I was looking more at the contract and less at the purpose of the contract.

Wonder what State?

Also wonder if there is some sort of lawsuit for fraud hiding someplace concerning the money already spent - ?

ScottGem · Dec 4, 2008, 05:07 PM

If the court does not recognize this as a purchase, then the monthly payments will be considered rent, whehter they are above market or not. However, the court might award you damages for the improvements. I say MIGHT because if it deemed to be a rental any improvements become the owners.

The one thing that MAY sway a court is the application to subdivide. I hope you have documentation of that.

LisaB4657 · Dec 4, 2008, 05:24 PM

The court will not order specific performance of the purchase agreement because it was not in writing. However the court should award Party B all of his costs to obtain the subdivision and a reimbursement of all of the money spent to improve the property. The court may order a reimbursement of some of the "mortgage payments" but that is not likely.

Tell Party B to slap a lis pendens on the property immediately and then get a lawsuit filed asap for specific performance or damages in the alternative. That will prevent Party A from proceeding with the sale and it may help make Party A little more amenable to negotiating with Party B.

pharmlaw · Dec 23, 2008, 04:59 PM

Thanks to everyone for their responses. This is a typical dispute -- no clear answers. It is my understanding that I would have to file a lawsuit BEFORE I could get a Lis Pendans to encumber the land (so as to put any potential purchaser on notice of that emcumbrance). Is that correct?

Potential causes of action -- specific performance and damges, as far as I see. Any others?

Thanks, again, everyone. If anyone would like to correspond with me by private e-mail, I would welcome that opportunit. Just let me know.

LisaB4657 · Dec 23, 2008, 06:47 PM

Anytime I've ever dealt with a lis pendens notice, it was always recorded simultaneously with the filing of the lawsuit. You want to make sure that you don't give the defendant a chance to transfer the property once he knows about the lawsuit. For example, you could file the lawsuit on Monday morning and the defendant would get served on Monday afternoon. If you don't have a lis pendens recorded by Monday afternoon the defendant could transfer the property on Monday night and you would be out of luck.

As for additional causes of action, you could always throw in a claim of fraud.