“Merging With the Deed”: Are Side Agreements Binding After Closing?

Occasionally, the parties to a home sale make side deals, and do not write them down. This can lead to later questions, regarding just how meaningful a side agreement is.

To know whether a side agreement is binding after closing, it helps to be familiar with the impact a deed transfer has on that agreement.

Let’s take a look and side agreements, and what it means when they either “merge with” or “survive” the deed.

Side Deals Can Be Created to Benefit a Seller, a Buyer, or Both

Often, a home’s seller will offer to sweeten the deal by making a promise to the buyer. In other cases, side deals can be meant as benefits to sellers.

Imagine you’re buying a townhome. You’ve already signed a purchase agreement to buy the property. You’ve told the seller you’ll pay an extra $2,000 if some new kitchen tiles, now on back order, are installed before you move in. The side deal for the kitchen flooring isn’t in writing, but you’ve promised to accept the future work and pay for it. You’re legally bound to come through on your part of the bargain, right?

Or consider this hypothetical situation. The home seller wants to keep access to land at the edge of the property. The buyer makes a promise that the seller can pass through that area any time. Is this a binding promise?

In both cases, the extra agreement must be accounted for in the deed language or in a document that expressly states the agreement will not merge with the deed.

Does the Side Deal “Merge With the Deed” or “Survive” It?

Unwritten agreements can be legally extinguished when a deed is signed. This involves a concept in contract law known as the merger doctrine. Traditionally, it has played a role in overriding a side deal in a property transaction.

The parties can ensure their deal survives the deed, though, through a separate written agreement. Such agreements can impact the rights and duties of third parties. Some can constitute easements. So they should be done with the advice and assistance of a real estate lawyer.

When a side deal survives (avoids) “merging with a deed” it becomes a legally meaningful component of a bargain. The parties are bound to carry out their side agreement.

Otherwise, all the contractual rights and remedies merge with the home deed.

Merging Gives the Deed the Final Word

Home buyers and sellers should be aware of the merger doctrine. They should know if any side deals that they might make will legally bind them after closing.

Note that the deed is the most important document at closing. The buyer accepts the deed after the original purchase agreement and after any side agreements might have been put forth. The deed deletes all the stuff that happened during negotiations. The deed merges all prior agreed-upon terms and supersedes them.

State law and court cases have etched this principle into common practice. The reason? Public policy. Rights and duties of the parties should be obvious from a search of official county records. In some cases, side agreements between buyer and seller could violate the terms of a mortgage, too. Thus, what’s written on the deed is the final word.

Don’t Let Necessary Work Be Put Off Until Later

In light of all of the above, a buyer doesn’t just take the seller’s word that this or that will be finished up later. The buyer needs to have the necessary home inspections done, and ask for any fixes to be complete before the final walkthrough, so that every aspect of the purchase agreement is resolved by closing. This can mean the seller gives the buyer money so the buyer can cover a fix that still needs to be made — but the deal itself has to be final by closing.

Unless they deliberately misrepresent the condition of the homes they sell, or fail to properly disclose defects, people who sell their homes are generally not held responsible for doing more work on the property after closing day. This is why home inspections before closing are so important for the buyer to take seriously.

 What defects in a home are significant enough to require disclosure to the buyer? See Defining “Material Defects” in the Seller’s Disclosure for guidance.

How to Handle a Request for a Side Deal

As a general rule, parties to a real estate purchase should discuss any side agreement attempts by the other party with their own real estate agents. Communication is key to a mutually satisfying agreement. The real estate agent might be able to come up with an excellent counteroffer that that the parties can memorialize in their written agreement, helping both sides feel good about their negotiations.  

In other words, the real estate agent should make the agreement an element of the official purchase contract — not just a promise based on a handshake.

When a side deal for repair work, new appliances, flooring, energy systems, property access, or any other understanding is put down in writing as a contractual agreement, the parties help to ensure that no element of their bargain gets forgotten, disputed, or superseded by the deed. The parties should understand and express their agreement that work will be done by insured, certified professionals.

And don’t forget to plan for permitting! That new fence, deck, or electrical work could require permits and fees, to comply with state and local laws. The local building department has complete information about which renovations require inspections and permits. If the seller is promising to have the work done, then the related part of the buyer’s purchase payment can be placed in the escrow account until the jobs are permitted, scheduled, finished, and approved.

 Some side agreements are contingent on the purchase of the home. A well-prepared buyer, with the help of an experienced agent, can succeed with a contingent offer if both parties are motivated to make it work.

Key Takeaway

At closing time, the buyer takes the home in the condition in which the seller leaves it. So, if seller and buyer have any side deals they intend to preserve, they must appear on the deed. Alternatively, they must be in a separate document that says their additional agreements will not merge with the deed.

Otherwise, one party can break the deal by not adhering to it. That’s a key pitfall of the side deal. There’s usually no way to enforce it.

Important note: This article is not meant as legal advice, either to prevent or solve disputes. Seek case-specific legal advice from an attorney in the state where the property exists.

Supporting References

Lee R. Schroeder, in Lima News (AIM Media Midwest Operating, LLC, Lima, Ohio): Legal-Ease: Two Big Pitfalls in Real Estate Deals (Mar. 18, 2023).

Tiveron Law, PLLC: Reference Guide for Real Estate Closings.

Barry Stone in the Los Angeles Times via LATimes.com (Access Media Group): Home-Sale Side Agreement Raises Serious Issues (May 2, 2010).

Deeds.com: DIY Renovations? Everything You Wanted to Know (or Not) About Permits (Nov. 6, 2020).

And as linked.

Photo credits: Olia Danilevich and RODNAE Productions, via Pexels.