SW Legal studies in Business

Apartment Owned As Shares of Stock Is Not Real Property
Description Washington state high court held that the sale of an apartment that was controlled by shares of stock in a corporation was governed by contract law, not by the law concerning how real property transactions must occur under the statute of frauds.
Topic Real and Personal Property
Key Words Cooperative Apartments; Stock; Interest in Property; Statute of Frauds
C A S E   S U M M A R Y
Facts Maryland Apartments, Inc. is a housing cooperative in Seattle organized in 1948. The corporation owns the land and building that contains 19 apartments. Each apartment is associated with a block of shares in the corporation. The units are rented by the corporation to the shareholders under long-term leases. One may become a resident only by buying a block of stock associated with a particular unit. The Firths offered the Lus $180,000 to by the stock associated with apartment 2, occupied by the Lus. The Firths made a deposit of $3,000 in April with the deal to close in October. The Lus asked for an extension to January, at which time they told the Firths the price was now $230,000. The Firths moved to compel specific performance; the Lus moved to dismiss the suit contending that the agreement did not comply with the real estate statute of frauds and so was unenforceable. The trial court held the agreement valid and ordered specific performance; the appeals court reversed, concluding the contract lacked a legal description of the apartment and so violated the statute of frauds. The Firths appealed.
Decision

Reversed. If an agreement is not for the actual conveyance of real property, or an interest in real property, it does not fall under the real estate statute of frauds even if the end result of the transaction is an interest in land. Stock in a corporation whose only asset is real property is not an interest in real property; it is ownership in a corporation. Hence, there is a valid contract here for the Lus to sell their stock to the Firths for $180,000.

Citation Firth v. Lu, 49 P.3d 117 (Sup. Ct., Wash., 2002)

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