A Handshake Is Not Enough for Property Deals

We’ve all heard it from those longing for yesteryear–a handshake was enough to make a deal. Unfortunately, that has never been the case in property deals under Michigan law.

Michigan has enacted what’s known as the Statute of Frauds–a concept that requires certain transactions to be in writing to be enforceable. In other words, it must be in writing or it does not count.

Michigan law provides: Every contract for the leasing for a longer period than 1 year, or for the sale of any lands, or any interest in lands, shall be void, unless the contract, or some note or memorandum thereof be in writing, and signed by the party by whom the lease or sale is to be made, or by some person thereunto by him lawfully authorized in writing.

A court will sometimes reframe the legal issue to avoid the harsh result of the Statute of Frauds. Sometimes legal claims like promissory estoppel and constructive trusts can be used to get around the voidness of undocumented transactions. But not always.

Take the recent case of Hajji v Esho, COA Case No. 329737.

Hajji purchased a lakefront house in White Lake, Michigan and foreclosure was commenced by the bank. Hajji had no intention of redeeming the
property for the redemption price ($500,000), so he enlisted the help of his uncle. The plan was that Uncle Esho would buy the property at a fire sale price and sell it back to Hajji for the lower purchase price. After Uncle Esho purchased the property, he refused to sell it back to Hajji for $130,000. Uncle Esho testified he never agreed to Hajji’s plan and instead decided to purchase the property for himself.

However, there was no written agreement between Hajji and Uncle Esho.

With this legal problem, Hajji tried to argue breach of constructive trust and equitable relief, fraud, unjust enrichment, and specific performance.

The Court of Appeals said no to these alternate equitable claims, and required any agreement for sale of property–including between uncle and nephew–to be in writing to be enforceable.

In sum, get your property deals in writing or else your handshake might not be enforced by the courts.

Author: Philip Ellison

Philip L. Ellison, MBA, JD, Esq is an attorney, business counselor, and civil litigator with Outside Legal Counsel PLC. He represents riparians, backlotters, and others protecting water access on Michigan's recreational lakes. Visit his online profile at www.olcplc.com.