In Florida, real estate transactions are governed by both real estate and contract law (other laws and regulations can also apply, like those related to mold, lead based paint, coastal control issues, etc.). As a result, transactions can quickly become complicated.
Most Buyers and sellers know that all real estate transactions should have a written contract in place to establish the obligations of the parties and to protect the parties from issues like those mentioned above.
Some believe, that it may be cost-effective to try and handle a real estate transaction among the parties without the assistance of a licensed real estate professional (like a “for sale by owner”), but there are risks with making that choice. Maybe the parties end up with a valid agreement; maybe they don’t.
For those who are trying to go at it on their own, here are five prerequisites to having an enforceable real estate contract in the State of Florida.
This is NOT a complete list, and within these 5 items not all nuances are discussed. This is simply a general overview of the material terms that should be included in any residential real estate sales contract in Florida.
1. Who Are The Parties To The Transaction?
When there is a sale of a Florida home or condo, at least two parties are involved: a seller and a buyer. That’s obvious, right? Except when there’s not: e.g., there may be several owners who are required to sign the contract in order to have a binding agreement.
Sometimes, it easy enough to determine who the sellers are and who should sign the contract. For instance, a condo may be purchased by someone from a group of sellers who share ownership after an inheritance (the buyer can check the probate records).
If a grandfather bequeathed his oceanfront condo on Miami Beach to his grand-kids and they would rather sell it than keep it, then they are free to do so. However, the buyer will need to have all of the grand-kids sign the contract (and the deed) in order for the buyer to take the property free and clear of any title issues (and the buyer may need the personal representative of the estate or the trustee of a trust to sign off as well).
Another example of multiple sellers that’s not so easy to spot: life estates. Here, there are many reasons why someone might leave their home to their spouse with a “life estate,” with their children owning a “remainder interest” in the property. In this scenario, the widow continues to live in the home until she passes away or decides to move out. Her children hold a legal interest in the real estate, but they do not have the right to the property until the life tenant dies.
If the widow and her children agree, then they can sell the home without a problem. However, there cannot be a binding agreement to sell the entire interest in the property unless both the owners of the remainder interest and the owner of the life estate sign off on the transaction.
If the widow decides to sell and doesn’t involve the kids, then the widow can only sell her life interest. (The only way she can sell the entire interest is if she has an enhanced life estate deed. If not, then the children are indispensable parties to any transaction involving the sale of the entire interest in the property. See, Siler v. All Pro Realty Service, Inc., 491 So. 2d 331 (Fla. Dist. Ct. App. 1986).)
Tip: if the widow has a standard life estate interest in the property she can close the transaction by simply obtaining a quit claim deed from the kids to her as grantee or obtain a deed from the kids to the buyer.
2. Does A Sales Contract Have to be in Writing?
In Florida law, there are certain agreements that are considered so important to the public interest that they have to be documented on paper, in writing, in order to be considered legally binding. This concept is called the “statute of frauds,” and it bars any claim for breach of contract involving the sale of real estate unless their is an agreement “in writing signed by the party to be charged or his or her agent.” See, Wiborg v. Eisenberg, 671 So. 2d 832 (Fla. 4th DCA 1996).
Simply stated, contracts to sell real estate in Florida must comply with the statute of frauds: meaning, they have to be written. If the buyer and the seller make a deal and shake on it, even nailing down the purchase price and all of the essential terms and conditions, then they must put all those details down in writing or their agreement will not be enforceable under Florida law.
Which means, that if the buyer decides to back out of the agreement to buy the condo two weeks after the handshake or the oral agreement was made, then the seller has no legal recourse against that buyer for breach of contract. If the seller tries to assert a claim (and tries to keep the earnest money deposit), the buyer has a legal defense based upon the “statute of frauds.”
Similarly, if the buyer is hot to buy the condo but the seller changes her mind and there was only a handshake agreement, then the buyer is out of luck. There’s no legal avenue to force the seller to go through with the deal (no specific performance).
For an example of a residential real estate contract form, check out this As-Is Residential Real Estate Agreement provided online by the Florida Realtors.
Tip: An enforceable contract for the sale of real property in Florida doesn’t have to be on a single page or in just one document; a legal sales contract can consist of several written documents (addendum) and they can be countersigned and copies can be considered as originals.
3. Property Description
All sales contracts for residential real estate must have a legally sufficient property description as part of the agreement (property address and/or legal description).
In fact, for a great many years, Florida courts have considered the description of the real estate being sold as one of the “most indispensable parts of an agreement to sell.” South Florida Citrus Land Co. v. Walden, 51 So. 554, 59 Fla. 606 (1910).
Usually, this is done as a “lot and block” or “metes and bounds” description of the property which includes a reference to where the deed is recorded (by book and page) in the county real estate records. See, Garvin v. Baker, 59 So. 2d 360 (Fla. 1952).
4. Consideration Must Be Included
Requiring that there be consideration for the sales contract in a residential real estate transaction is another mandatory term under Florida contract law. For any contract to be valid in Florida, “consideration” has to exist.
What is “consideration” in a real estate deal? It is the benefit or interest that was provided by the buyer to the seller that induced the seller to agree to sell the land (i.e. the money being paid or the property being exchanged).
5. Meeting of the Minds
Finally, the contract must reflect the agreement and understanding of the parties, buyers and sellers, regarding the material terms of the deal. Both sides must understand and agree on the deal i.e, that a certain piece of real estate is being sold at a certain price on or before a set date. The concept of having a common understanding of the terms of the deal is known as a “meeting of the minds.”
While the parties need not have a “meeting of the minds” on every little detail of their bargain, they do have to have a joint understanding of the material terms. The parties must agree to the offer, the acceptance, the consideration given, and the specific real property involved.
When might there be a failure of a “meeting of the minds” in a real estate sale? One example is when there is lack of accord on the number of acres involved in the transaction. If the sellers think there is 235 acres on the table, but they are off their count by 57 acres, then there’s not a valid contract. See, Perkins v. Simmons, 15 So. 2d 289, 290 (Fla. 1943).
As the Florida Supreme Court explains: “The parties must mutually assent to each of the terms and conditions of both the offer and the acceptance in order to be a meeting of the minds and the closing of a lawful and binding contract.”
This list doesn’t include things like making sure that the parties have legal capacity to sign the contract or determining if there is a binding deal because there have been several counter-offers (for example, where the parties make several changes to the agreement that all parties do not initial or sign off on). Additionally, anyone considering entering into a contract to buy (or sell) a home or condo in Florida must understand that there are all sort of laws that must be adhered to in order to have an enforceable contract.
For instance, Florida Statute 720.401 states that where a mandatory Home Owner’s Association is involved, the sales contract must incorporate the HOA’s disclosure summary. If this HOA disclosure summary is not provided to a buyer before he or she signs the sales agreement, then that buyer has the power to void the contract and walk away under this Florida law. Florida Statute 720.401 even goes so far as to provide an example of the form that is to be used for this disclosure summary.
Questions About a Florida Residential Real Estate Sales Agreement?
If you are either a seller or buyer of a home or condo here in South Florida, then you need to know how Florida real estate and contract law applies to the situation in order to protect your legal rights. Do you have a binding contract? Can you get your earnest money returned? Can you force the seller or buyer to close the deal (specific performance)?
A good piece of advice if you are faced with any of these issues, is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
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