Purchasing New York real estate is not something you do with a handshake and an oral agreement. A real estate purchase is a legal process that requires, among other things, the filing of a written deed transferring ownership from the seller to the buyer. The deed must clearly identify the new owners of the property, whether they are individuals or a corporation. Any agreements or understandings among the buyers regarding the division of ownership need to be sorted out before closing.
Judge Rejects Girlfriend’s Effort to Acquire Half of Boyfriend’s Building
A recent case from Brooklyn helps illustrate this point. This parties in this case were boyfriend and girlfriend. In 2007, the couple purchased a rental property in Brooklyn as tenants in common—that is, they each held a separate, undivided one-half interest in the property.
The couple had a joint bank account where they deposited the rent checks from the Brooklyn property. In 2009, the boyfriend decided to buy a second Brooklyn property. As this property was owned by a corporation, the boyfriend actually acquired 100% of the corporation’s stock. The terms of the sale required him to make a $40,000 down payment and thereafter assume responsibility for a mortgage on the property.
The boyfriend used funds from the joint account to make the down payment. The girlfriend understood and agreed to this. But she later claimed he also promised to add her name to the deed as a co-owner of the second property. According to her, he said the corporation still owned the property and it would have to be dissolved before a new deed could be filed. Eventually, he transferred the property to a second corporate entity under his control.
The girlfriend later sued the boyfriend in Brooklyn Supreme Court, alleging there was an “oral agreement” to make her a co-owner of the second property. The judge rejected this claim and granted summary judgment to the boyfriend. Under New York’s statute of frauds, any contract for the sale of real property must be in writing. This includes an agreement involving the sale of a corporation “whose only asset is an interest in realty.”
The girlfriend argued the statute of frauds should not apply here, because the alleged oral agreement with her boyfriend should be classified as a “joint venture.” The judge did not buy this. She said aside from the existence of a joint bank account, there was no evidence the couple ever agreed to enter into a joint venture. There was no agreement to share profits from either of the Brooklyn properties, as is typical with a joint venture. At best, the boyfriend’s use of funds from the joint account indicated the girlfriend “loaned” him 50% of the down payment. That did not make them business partners.