Real Estate Attorney and Counsel for North Texas Commercial Association of REALTORS®, Inc. (NTCAR)
Friday, March 31, 2017
Oral Contracts - Binding or Not?
all been told that oral agreements are not binding. But don’t tell that to
David Reyes and Sonia Valenzuela.
1993 David and Sonia approached Annette Burrus and inquired about buying one of
her lots in Tornillo Texas. Tornillo is a colonia
in El Paso County, on the border, with a population of 1,568 as of the last
claims she advised them that she had no lots for sale, but instead she offered
to rent them a portion of her 11-acre tract. Burrus offered to purchase a
mobile home of their choice, which she would move to the property at her
expense. Thereafter, David and Sonia and their children could rent the mobile
home and the lot from Burrus on a month-to-month basis.
purchased a mobile home as selected by David and Sonia, and had the home moved
to the lot. David and Sonia paid $500 before moving into the mobile home in
September 1994, and thereafter paid $200 per month. For 17 years.
Burrus saw the relationship as Landlord and Tenant (but evidently Burrus
neither repaired nor maintained any portions of the lot and home), David and
Sonia believed that they had agreed to purchase the mobile home from Burrus for
$21,000, that their initial $500 payment was a down payment on the lot, and
that the $200 monthly payments were to be applied as principal and interest on
a seller-financed Note.
would be the case in a contract for deed transaction, David and Sonia anticipated
they would receive full title to both the mobile home and lot from Burrus once
they paid off the loan.
after they moved in, David and Sonia erected a chain link fence around the
perimeter of the lot, installed plumbing fixtures, lighting and ceramic tiles
in the home, built a shed and dog kennel and planted trees. Then they added a
porch and several rooms to the mobile home, moved the home to the center of the
lot and paid to have a concrete slab poured on which to build the additions.
all, David and Sonia spent over $22,000 in materials for the improvements with
no reimbursement from Burrus.
March 2011 Burrus began negotiating to sell her acreage to Tornillo DTP VI,
LLC, which included the lot where David and Sonia were living. Evidently
Tornillo DTP was buying the property to lease it to Dollar General, which
intended to build a retail store at the site.
signed a contract with Tornillo DTP in January 2012, in which she would receive
$90,000 for the sale, with a closing date in February 2012. After Burrus
informed David and Sonia of the closing, demolition crews hired by Tornillo DTP
came onto their property and began removing improvements including the fence,
trees and dog kennel. So David and Sonia sued both Burrus and Tornillo in April
2012, attempting to stop the demolition.
and Sonia resolved their dispute with Tornillo DTP, then turned their gun
turrets towards Burrus. The jury determined that an oral agreement existed for
Burrus to sell her property to David and Sonia, Burrus breached the agreement,
and David and Sonia were damaged.
trial court entered judgment awarding David and Sonia $70,000 in damages,
$92,000 in attorney’s fees and $23,000 related to Burrus’ failure to render
annual accounting statements as provided by Texas’ contract for deed statutes.
appealed, contending that oral agreements regarding real estate are prohibited
appellate court first concluded that ordinary real estate transactions in Texas
must be written. But also that there were exceptions to that rule when valuable
and unreimbursed improvements were made to the property, and when fairness and
equity requires Courts to enforce an unwritten agreement.
spare you the 23-page single-spaced analysis written by the Court, but you can
already guess the outcome. The trial court’s judgment for David and Sonia is
the oral agreement. Yes Texas law still says that real estate agreements
regarding the purchase and sale of property must be written. And yet judges and
juries can still find a way to ignore the law.
oral-agreements-are-not-binding-in-Texas-theory is even more problematic
regarding leasing, where real estate leases for a term of one year or less need
not be written. That can be particularly dangerous in the context of short-term
executive office leasing, short-term warehouse leasing or a “holiday” lease of
B/L: If for no other reason than clarity, get it in writing!
A. Lautin, Esq.*
Reprinted with the
permission of the North Texas Commercial Association of REALTORS®,