and wholesalers misuse Memorandums of Contract, creating clouds on property titles and disrupting real estate transactions. In legitimate cases, the Memorandum protects buyers from sellers who try to back out of deals or accept higher offers. But problems arise when deals fall through. Some investors, unable to close or find buyers, file a Memorandum anyway. They get it notarized and recorded in property records, even though the contract is no longer valid. This creates a cloud on the title that prevents the homeowner from selling. Once filed, a Memorandum can stop a homeowner from selling their property because title companies will not insure the transaction. Unscrupulous investors
These records are vital in challenging an improper filing.
challenge it within 45 days, the Memorandum loses legal effect. 4. CONSEQUENCES FOR NON-
NATIONAL IMPACT This issue has broad consequences: ▷ TITLE INSURANCE COMPANIES CANNOT ISSUE CLEAR POLICIES. ▷ REAL ESTATE AGENTS SEE DEALS DELAYED OR CANCELED. ▷ LEGITIMATE BUYERS FACE COMPLICATIONS AT CLOSING. ▷ HOMEOWNERS ARE TRAPPED BY CLOUDS ON THEIR TITLE. ▷ ETHICAL INVESTORS AND WHOLESALERS FACE REPUTATIONAL HARM. If not addressed, sales may be dismissed or delayed, costing property owners time, money, and opportunity. ONE STATE IS FIGHTING BACK Texas recently took action against Memorandum abuse. In 2025, the legislature passed House Bill 4063, which takes effect September 1, 2025. The Texas Land Title Association supported the bill after documenting widespread misuse. Key protections in the new law include: 1. TIME LIMITS ON OLD CLAIMS. Memorandums expire after four years from the contract date, preventing stale claims. 2. MANDATORY NOTICE REQUIREMENTS. Before filing, the party must provide proper notice to the homeowner by certified mail, including a copy of the Memorandum and an explanatory letter. Notices must be sent to all known addresses for the owner. 3. FIGHTING BACK PROCEDURES. Homeowners can file an affidavit for release. If the filer does not
COMPLIANCE. Memorandums that do not meet these requirements will not create constructive notice, affect title, or bind buyers and lenders. THE BOTTOM LINE Texas has shown one way to address the abuse of Memorandums of Contract. Given the nationwide scope of the problem, other states may need to adopt similar measures. The goal is clear: preserve the legitimate use of Memorandums while protecting property owners from abuse, ensuring fairness for buyers and investors, and maintaining transparency
use this as leverage, demanding thousands of dollars in exchange for releasing the Memorandum. This is essentially a form of legal
in real estate transactions. If you are facing issues with a Memorandum of Contract, professional legal assistance can help you navigate the process.
extortion. Homeowners, desperate to clear their titles, often pay significant sums to make the issue “go away,” even when the original contracts were invalid or had already been terminated. The fallout doesn’t stop with homeowners. Title companies cannot provide clear title insurance if a Memorandum is on record. This delays or blocks legitimate sales and complicates the entire real estate process. HOW TO PROTECT YOURSELF Take action immediately and seek legal help, keeping thorough documentation of your real estate transactions, including: ▷ SIGNED CONTRACTS AND DOCUMENTS ▷ RECORDS OF DISPUTES OR ISSUES ▷ COMMUNICATION LOGS ▷ DOCUMENTATION OF CONTRACT TERMINATIONS
GAYLENE ROGERS LONERGAN
Gaylene Rogers Lonergan founded The Lonergan Law Firm, P.L.L.C., a real estate and banking law practice and real estate closing office, headquartered in Dallas, Texas in 2000. Lonergan has more than 40 years’ experience with commercial and residential real estate law, banking, and title transactions.
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