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Land Contract Information
A land contract is an agreement for the sale of an interest in real estate in which the purchase price is to be paid in installments and no promissory note or mortgage is involved between the seller and the buyer. Generally under such agreements, the seller is called the vendor and the buyer is called the vendee.
When a buyer default occurs (failure to make payment or other breach of the contract) a seller should look to the remedies provided in the land contract. It should be read carefully to determine the parties rights and obligations. Generally, a land contract will give the seller at least three remedies to pursue if a buyer has failed to meet the requirements of a land contract:
Generally, a seller must use the court system in order to regain possession of the property and evict a land contract buyer who has failed to meet the requirements of the land contract.
Land Contract Forfeiture
A Seller may regain possession of land contact property by forfeiture if:
Before a seller may begin the procedure to regain possession of the land contract property the seller must:
It is important that a buyer respond in writing to a notice of forfeiture even if it may have been sent by mistake. If the buyer fails to respond to the notice of forfeiture or otherwise fails to come to an agreement with the seller within the time stated in the notice, the seller may take legal action. To do this the seller must file a summons and complaint, together with a copy of the land contract, the notice of forfeiture and proof of service with the appropriate court. The court will deliver or mail to the buyer (defendant) the summons and complaint. The summons states the date and time on which the court will hold a hearing (usually called a summary proceeding). The seller and buyer should appear at the court on the date and time state in the summons and should be prepared to state their positions to the court.
At the court hearing, if the seller is successful the buyer will have a certain amount of time (90 or 180 days depending upon the amount the buyer has paid on the contract) in which to pay the missed payments and court costs and/or to correct any other material breach of the land contract. A buyer who fails to pay or correct the breach within the stated time period may be evicted in the same way a tenant is evicted from rental property.
Generally, when a seller has regained possession of the property after forfeiture the buyer has no further liability under the land contract.
Land Contract Foreclosure
Land contract foreclosure is generally a more complicated and lengthy remedy to regain possession of the property than forfeiture. A significant difference; between forfeiture and foreclosure is that in a forfeiture a buyer may prevent the loss of the property by merely paying past due installments, while in foreclose the buyer may be required to pay the entire balance due under the land contract. In addition, in foreclosure even if the property is returned to the seller the buyer may remain liable to the seller for the portion of the balance due under the land contract which was not satisfied by the sale of the property.
Generally, upon a buyer's fulfillment of the land contract the seller should give the required deed conveying the property free of liens created by the seller. A seller who fails to provide the required deed may be in breach of the contact.
If the seller is unwilling or unable to give the required deed the buyer may have various options including legal action for:
Above all, both the buyer and the seller may be able to avoid problems if they talk to each other when questions or concerns arise regarding the land contact.
Funded in part by the Legal Services Corporation, Michigan State Bar Foundation, OSA and Area Agencies on Aging regions 9, 10 & 11.