Posted by GibbsGiden Under Business and Commercial Law
By now, many of us know that an exchange of emails or other electronic messages can constitute (or at least help to create) an enforceable contract. I bet you haven’t specifically thought about whether an exchange of ephermeral electronic messages (e.g., text message, tweets, facebook instant messenger, etc.) can create a binding contract for the sale of real property. Well, that issue has been resolved in California by Assembly Bill 2136 (Click here to read AB 2136) which took effect on January 1, 2015.
AB 2136 amends Civil Code Section 1624 (the “Statute of Frauds”). The Statute of Frauds expressly states that certain oral contracts are not enforceable, including conveyances of interests in land, leases exceeding one year, and real estate broker commission agreements. Rather, such contracts must be in writing (or at least be evidenced by a sufficient writing) and signed by the party against whom enforcement is sought. Thus, in this modern age of electronic communication, the question comes to mind: can a tweet, facebook post, text message or other instant message constitute a “writing” sufficient to satisfy the Statute of Frauds? AB 2136 adds a provision to Civil Code Section 1624 that “an electronic message of an ephemeral nature that is not designed to be retained or create a permanent record, including, but not limited to a text or instant message . . . is insufficient to constitute a contract to convey real property. . .”. (Yes, we love that word “ephemeral” too).
Truth be told, AB 2136 was pushed through the California legislature for a reason other than to modernize California’s Statute of Frauds. AB 2136 was sponsored by the California Association of Realtors to bring up-to-date a real estate broker’s record retention obligations. Specifically, AB 2136 also amends Business and Professions Code Section 10148 to help clarify a real estate broker’s record retention obligations when it comes to electronic communications, providing that Section 10148 “shall not be construed to require a licensed real estate broker to retain electronic messages of an ephemeral nature, as described in subdivision (d) of Section 1624 of the Civil Code.”
Section 10148 requires a licensed real estate broker to retain for 3 years copies of all listings, deposit receipts, canceled checks, trust records, and other documents obtained or executed by the broker in connection with any transactions for which a real estate broker license is required. In 2013, the Bureau of Real Estate opined that “texts, email, tweets, and the like” must be maintained under the record retention requirements of Section 10148. Many brokers complained that this broad interpretation of a “record” was too expansive and that preserving printouts of social media exchanges and text messages for almost every client is far too cumbersome. These ephemeral communications are often informal, rarely contain a “signature,” and take place in a manner and forums not intended for permanent access or filing. Thus, AB 2136’s provisions conform to the intent behind the Statute of Frauds which seeks to protect individuals and their property interests from fraud by requiring certain formalities in real estate contracts, while providing clarity for constituents of the California Association of Realtors as to their record-keeping obligations.
It should be noted that emails are not specifically mentioned in Section 1624. Therefore, in some cases, an email or a series of emails may constitute sufficient writings to satisfy the Statute of Frauds. In addition, emails are not exempt from the record keeping requirement of Section 10148. As such, brokers should have a reliable (and not ephemeral) system in place to save emails with clients that are material to real estate transactions.
For more information contact:
Christopher E. Ng, Esq.
Gibbs Giden Locher Turner Senet & Wittbrodt LLP
1880 Century Park East, 12th Floor
Los Angeles, California 90067
Phone: (310) 552-3400
Copyright 2015 Gibbs Giden Locher Turner Senet & Wittbrodt LLP ©