Oral or Written Lease Agreement?

Oral or Written Lease Agreement?

In general, contracts of almost any kind can be either oral or written and each can be equally valid and enforceable no matter what the legal purpose or dollar amount involved.  However, most states have adopted a legal doctrine called the Statute of Frauds and put the doctrine into their statutes.  these laws are fairly uniform among the states and cover a number of contract issues.

Specific to real estate, Statute of Frauds laws require contracts related to most real estate transactions to be in writin.  As examples, contracts to list real estate for sale or lease with a broker must be in writing to be enforceable in Court and oral contracts for those purposes are worthless.  This is usually so even though there might be indisputable non-written evidence as to the contracts, for example, unrealted third party witnesses.  Many states further specify certain items that must be included in such contracts.

Statute of Frauds laws of most states require a lease of real estate for a term of more than one year to be in writing.  However, an oral lease for a term of one year or less is binding and will be enforceable regarding most terms normally found in a lease.  An oral lease can be amended orally.

As a practical matter, all leases of any duration should be in writing because the written document provides a record of the terms of the landlord-tenant relationship so that its terms and conditions can be easily and clearly discernable by the parties, their heirs, or assignees.

As for any type of oral contract, oral leases regularly cause problems for both landlords and tenants because it is often difficult to determine what the terms of the lease are.

This can be the result of a number of factors, including the folowing:

  • Misunderstandings by either party at inception of the agreement,
  • Misremembering or forgetting terms later by either party,
  • Purposeful distortion of terms by one party or the other, and/or
  • Limited or no way of proving the lease terms.

Often a witness to the oral lease can be of value, but that may require that the witness be impartial or at least not a beneficiary of the lease in any way.

When an oral lease ends up in Court, the judge can sometimes make a reasonable decision based on circumstantial evidence.  for example, if the disagreement between landlord and tenant related to the amount of rent, then cancelled checks or recipts would prove what the rent was for those past months.  However, it would usually not support or deny any rent increase.

Sometimes a judge makes the decision based on which party can provide the best circumstantial evidence whether or not that evidence is directly relevant to the disputed issue.  However, when there is no clear evidence of who might be telling the truth, the judge may make a decision based on who was the best liar.  If both parties are equally believable or equally unbelievable, the decision is most likely to be in favor of the tenant.

Judges sometimes will not enforce certain terms of an oral lease.  Non-typical lease terms will li,kely not be enforcecd.  Even certain typical terms may not be enforced.  for example, it is not uncommon that a judge will refuse to enforce a late penalty provision that is not in writing.

A month-to-month oral lease can continue for many years so long as it remains a month-to-month lease or a lease for a term of no longer than one year.

The bottom line is that oral leases are only as good as the paper they are written on.

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