Legal Question in Real Estate Law in California
Regarding an Oral Agreement:
I'm wondering if an oral agreement that took place in the course of a real estate transaction (but not the actual contract itself) is enforceable without being written.
A buyer & seller were negotiating with the lien-holder of a second mortgage that was willing to postpone the foreclosure sale until an agreed upon date as long as consideration, in the form of increasing the selling price of the property, was given.
The lien-holder had said they would postpone the foreclosure sale date of the property until after the pre-pay penalty time period had elapsed. The length of time was less than 2- months.
As this would have cost the lien-holder a specific loss of income from the pre-payment penalty, the sellers were asked to match that amount in the form of increasing the contracted sale amount in benefit to the seller. That had been done & a new sales contract was formed with the increased amount.
The lien-holder reneged on their agreement & forced the sale of the property prior to the agreed date without notification to the buyers. The buyers were properly funded, had opened escrow, & were waiting to sign closing papers on the agreed upon date.
The buyer's immediate injury is the loss of equity of the property they were purchasing as well as the potential profits from an agreement that was made with the seller had the purchase transaction been completed.
This subject flirts with the Statutes of Frauds here in California.
Thank you in advance for the input. We're curious to hear your opinions...
2 Answers from Attorneys
In my view, such an oral promise would be difficult to impossible to enforce or to obtain damages for its breach. This situation is commonplace these days, and while I believe there is legislation proposed or pending to oblige lenders to hold off on foreclosure while certain negotiations are in progress, I don't know of any easy way to enforce an oral promise to forbear.
Agreements to postpone a foreclosure sale in California are governed by Civil Code section 2924g. "(c) (1) There may be a postponement or postponements of the sale proceedings, including a postponement upon instruction by the beneficiary to the trustee that the sale proceedings be postponed, at any time prior to the completion of the sale for any period of time not to exceed a total of 365 days from the date set forth in the notice of sale. The trustee shall postpone the sale in accordance with any of the following:
(A) Upon the order of any court of competent jurisdiction.
(B) If stayed by operation of law.
(C) By mutual agreement, whether oral or in writing, of any trustor and any beneficiary or any mortgagor and any mortgagee.
(D) At the discretion of the trustee." (Civ. Code, sect. 2924g, subd. (c)(1).)
The statute does not require the agreement to be in writing, because it specifically mentions oral agreements.
I don't see you having a statute of frauds problem. I see you having a proof problem. Oral agreements are hard to prove when the other party denies that there was ever any agreement at all. In your situation, the holder of the second deed of trust would have some sort of communications with the escrow, to get paid since the purchase price was raised to cover the prepayment penalty issue.
Is there proof of this?
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