Operations
‘Under Contract’ But Not Really? ABUSE OF MEMORANDUMS OF CONTRACT CREATE HURDLES FOR PROPERTY SALES.
GAYLENE ROGERS LONERGAN
Y ou’ve worked hard to build equity in your home or investment property. But imagine discovering that someone has filed a legal document claiming they have a contract to buy your property—even though you’ve never heard of them, or they once had a contract but failed to close. Now what? Property owners are facing a troubling new issue: the abuse of Memorandums of Contract. This practice is creating serious challenges for homeowners, title companies, and real estate professionals. MEMORANDUM SOF CONTRACT A Memorandum of Contract (also called a “Memo of Contract” or “Notice of Contract”) is a legal tool used in real estate transactions to provide public notice that a property is under contract, even when the full purchase agreement is not recorded in public records.
HOW IT SHOULD WORK The Memorandum serves as a public record that alerts third parties — such as other potential buyers, lenders, and title companies — that the property has a pending sale. This protects the buyer’s interest without disclosing private details of the transaction. A proper Memorandum typically includes: ▷ NAMES OF BUYER AND SELLER ▷ PROPERTY DESCRIPTION (ADDRESS AND LEGAL DESCRIPTION) ▷ CONTRACT DATE ▷ KEY TERMS (SOMETIMES
property is encumbered by a sales contract. It prevents the seller from selling to another party without the buyer’s knowledge. LEGITIMATE USES A Memorandum is usually recorded shortly after a purchase agreement is signed, particularly in transactions with longer closing periods or when the buyer wants immediate protection. Unlike recording the full purchase agreement, which includes private financial and personal information, the Memorandum contains only essential details for public notice. It is normally removed from public records after closing when the deed transfers, or if the contract is terminated, through a release or cancellation document. THE PROBLEM What began as a legitimate protection mechanism has now become a serious problem. Across the U.S., some investors
INCLUDING PURCHASE PRICE) ▷ SIGNATURES OF BOTH PARTIES
THE LEGAL IMPACT Once recorded with the county clerk or recorder’s office, the Memorandum creates “constructive notice.” This means anyone searching public records will see that the
12 | think realty magazine :: december - january 2026
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