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REAL ESTATE 48: Statute of frauds rendered the acquisition agreement unenforceable.

In March 2011, plaintiff and defendant entered into discussions for Defendant to participate in a real estate investment program run by plaintiff.

The terms of the investment program were outlined in a written acquisition agreement, but plaintiff and Defendant failed to sign the agreement. Under the terms of the agreement, plaintiff would identify properties for Defendant to purchase as investment properties. If Defendant chose to purchase a property, plaintiff would purchase the property on Defendant’s behalf, and would title the property in either Defendant’s name, or in the name of Defendant’s designated entity. Plaintiff would receive $5,000 for this service. The agreement went on to provide that plaintiff retained an exclusive right to sell any property obtained for Defendant and would receive a commission of 7% of the gross sale of any property sold. The remaining proceeds of the sale, after deducting costs incurred by Defendant, would be split evenly between plaintiff and Defendant. If the property were sold for a profit of less than $1,000, the proceeds would not be split. If any property acquired by plaintiff for Defendant was not sold within five years of the agreement, plaintiff would be entitled to 50% of the property’s gross sale price premised on a valuation of the property.

Plaintiff purchased two properties for Defendant under the agreement at a sheriff’s sale on March 22, 2011. Plaintiff had the properties deeded to Defendant’s LLC. Five years later, the properties had not been sold, and defendants refused to pay plaintiff under the agreement. Plaintiff filed a complaint in August 2017, alleging breach of contract and unjust enrichment, and sought 50% of the equity in the properties under the agreement.

Defendants moved for summary disposition under MCR 2.116(C)(7) and (8), arguing that the agreement was unenforceable under the statute of frauds because the agreement granted a conveyance of land to plaintiff, it could not be completed within one year, and plaintiff sought a commission for the sale of real estate.

The court found the agreement unenforceable under the statute of frauds because it granted plaintiff an interest in land.

The starting point in analyzing oral statements for contractual implications is to determine the meaning that reasonable persons might have attached to the language, given the circumstances presented. Furthermore, the overreaching principle of contract interpretation is that the court looks to all the relevant circumstances surrounding the transaction, including all writings, oral statements, and other conduct by which the parties manifested their intent.

MCL 566.106 requires contracts establishing an interest in land to be in writing. Contracts that fall within any portion of the statute of frauds are unenforceable.

Plaintiff and defendants agree that there was no writing in this case. Thus, the agreement’s terms determine whether it falls within the statute of frauds. Three types of contracts that fall within the statute of frauds are relevant in this case: (1) contracts that cannot be completed within one year of formation, MCL 566.132(1)(a), (2) contracts paying a commission for the sale of land, MCL 566.132(1)(e), and (3) contracts creating an interest in land, MCL 566.106. If the agreement falls within any of these areas then it falls within the statute of frauds and is unenforceable.

Accordingly, the trial court did not err by granting summary disposition to defendants because the statute of frauds rendered the agreement unenforceable.

Are you involved in a real estate dispute in Michigan? Are you seeking an efficient and effective resolution to a property litigation matter?

If you are facing a residential or commercial real estate, seek the advice of an experienced and skilled real estate litigation attorney at Aldrich Legal Services in Plymouth.

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