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GENERAL OBLIGATIONS LAW 5-703 GIVES AN EQUITY COURT THE POWER TO ENFORCE AN ORAL CONTRACT FOR THE PURCHASE OF REAL PROPERTY; THE CAUSES OF ACTION SEEKING TO ENFORCE AN ALLEGED ORAL AGREEMENT GIVING PLAINTIFFS THE OPTION TO PURCHASE THE PROPERTY UPON THE OWNER’S DEATH SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, held that the general statute of frauds statute, General Obligations Law (GOL) 5-701, did not apply to the alleged oral agreement to give plaintiffs the option to buy the decedent’s property upon her death. Rather GOL 5-703, which carves out an exception for specific performance of a real estate contract, applied. Decedent owned a two-unit property and plaintiffs rented the second unit. Plaintiffs alleged decedent asked them to care for her in exchange for the option to purchase. Plaintiffs did in fact care for decedent until her death. The executor refused to honor the alleged oral agreement and plaintiffs sued:

General Obligations Law § 5-701, the general statute of frauds provision outlining which agreements must be in writing, contains no explicit statutory authority for a court, exercising its equitable powers, to grant specific performance of an oral agreement insufficiently memorialized in writing so as to satisfy the statute of frauds. Notably, in Messner Vetere Berger McNamee Schmetterer Euro RSCG v Aegis Group (93 NY2d 229, 234 n 1), the Court of Appeals clarified that New York has not adopted a judicially created common-law exception to General Obligations Law § 5-701, which would permit a court to direct specific performance of an oral agreement in cases of part performance.

By contrast, General Obligations Law § 5-703, the more specific statute of frauds provision relating to contracts concerning real property, contains an explicit carve-out, which provides that “[n]othing contained in [General Obligations Law § 5-703] abridges the powers of courts of equity to compel specific performance of agreements in cases of part performance”… .

Here, the plaintiffs’ allegations that they entered into an oral option agreement … to purchase the subject property from her estate describe, in sum and substance, “[a] contract to devise real property . . . or any interest therein or right with reference thereto” … , and therefore, this action is governed by General Obligations Law § 5-703 … . Accordingly, since the action is governed by General Obligations Law § 5-703, the plaintiffs are not foreclosed, as a matter of law, from obtaining the remedy of specific performance … . Korman v Corbett, 2020 NY Slip Op 02637, Second Dept 5-6-20

 

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