A property investor has failed in his attempt to evict his mother and three siblings after a verbal agreement went sour and has now been ordered to reimburse her. He bought the Greensborough house in October 2002 after his parents were unable to secure a loan to purchase the property. They moved into the house the same year. In 2003, they transferred a block of land in Diamond Creek into their son’s name. They had been planning to build their dream home on the land.
The son told the Victorian Civil and Administration Tribunal (VCAT) that the transfer of the land into his name had been repayment for loans he had made to his parents. But his mother argued that the transfer had been made in exchange for the Greensborough house in which they lived. To make up the difference, she said she paid $200 per week to her son. Her son said that the $200 per week was rent, which amounted to a tenancy agreement between them.
The family stopped paying the $200 per week after a year and a half. The mother told the tribunal that her son told her “not to worry about it.” The son said he had continually asked for the rent to be paid.
The relationship soured further when renovations were made to the property and the son ceased communications with his mother in 2013. The mother says that they did not put any of their agreements in writing, although she was warned to do so, saying that she trusted her son.
VCAT member Kylea Campama took into account the family’s history of lending each other money and the son’s failure to seek any payment from his parents in more than ten years since they stopped paying the $200 per week.
“While [their] relationship has been eroded now to a point where it seems unlikely to recover, I have no doubt that they trusted and relied on one another at the time the arrangement was entered into. It is therefore not surprising that there is no written agreement or deed,” she said, finding the agreement did not have the characteristics of a residential tenancy agreement and the eviction notice to vacate had no legal basis.
Is a Verbal Agreement a Contract?
For a contract to be legally binding, its terms must be clear, which often means verbal contracts were difficult to define in courts. The basic essential elements of a legally binding contract, of any type, are:
- offer and an acceptance;
- an intention by the parties to the contract to be bound;
- capacity of the parties contracting;
- consideration moving from the parties;
- lawful objects of the contract; and
- a stipulated place where the contract is considered formed.
A verbal agreement is notoriously difficult to prove which makes the enforcement of a verbal agreement time consuming and challenging. Not only do you need to prove the verbal agreement exists, but you also need to evidence just what the actual terms of the agreement are, which, in the absence of written documentary evidence, can boil down to one person’s word against the other.
If it is not possible or convenient for you to enter into a written agreement then as a minimum you should keep a detailed record of all your discussions and negotiations with the other party, and copies of all correspondence between yourselves. This will at the very least provide a much needed paper trail should things go wrong and save you the stress of having to rely on memory and a “he said / she said” scenario.
It’s important to make sure that any agreement or contract you make is legally binding and for this reason, you should always seek legal advice. Without legal advice, you may sign a contract with conditions or clauses that you didn’t realise were there. Instead, a lawyer will help you to carefully identify and address each of the terms and conditions of the agreement so both parties have the same understanding and intention.
Needless to say, our advice is always to put any type of agreement in writing – especially between family members. It’s important to seek legal advice before entering into an agreement rather than trying to resolve a dispute once the relationship has broken down irretrievably. We are particularly experienced in property disputes.
We offer a FREE, 10-minute consultation so contact us today if you have any questions about property disputes or are seeking legal advice.