The Ins and Outs of Land Contracts: What You Need to Know

May 3, 2023.

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In this comprehensive guide to land contracts, you will learn about the definition, types and key elements of land contracts, as well as the legal requirements surrounding them. You’ll discover the benefits and limitations of using land contracts and how to draft and negotiate them effectively.

Additionally, this article delves into the consequences of defaulting on a land contract and how to handle disputes and resolutions. Lastly, we will explore the tax implications, reporting and record-keeping aspects related to land contracts.

Definition and Overview of Land Contracts

A land contract, also known as an installment land contract or a contract for deed, is a legal agreement between a buyer and a seller for the purchase of real estate property.

In this arrangement, the seller essentially finances the buyer’s purchase, and the buyer agrees to make regular payments, often monthly or quarterly, to the seller over a specific period, including interest. Once the payment terms are satisfied, the seller conveys the property’s legal title to the buyer.

Land contracts are commonly used when a buyer cannot secure traditional financing from a bank, or when the seller wants to expedite the sale, incentivize a buyer, or create a regular income stream.

Terminology and Concepts

Vendor and Vendee: In a land contract, the seller is called the vendor, while the buyer is called the vendee.

Legal Title and Equitable Title: One of the fundamental concepts in land contracts is the separation of the legal title and equitable title. The vendor retains the legal title to the property until the vendee pays the full purchase price, satisfying the terms of the land contract. The vendee acquires an equitable title, which grants them the right to use and possess the property.

Down Payment: A land contract typically requires the vendee to make a down payment which is a percentage of the total purchase price. This amount varies and is negotiable between the vendor and the vendee.

Interest Rate: The contract will specify an interest rate, which may be fixed or variable, for the vendee’s payments toward the purchase price of the property. Interest rates in land contracts are generally higher than those offered by traditional lenders, reflecting the increased risk for the vendor.

Balloon Payment: Some land contracts feature a balloon payment, which is a large, lump-sum payment due at the end of the contract term. This allows the vendee to make smaller, regular payments throughout the contract but requires them to secure alternative financing or make other arrangements to pay the remaining balance.

Forfeiture: In case the vendee defaults on their payments, the vendor has the right to terminate the contract and forfeit the vendee’s equitable title. In this case, the vendee loses any funds paid towards the property.

Benefits of Land Contracts

Flexibility: Land contracts are often more flexible than traditional mortgage agreements, allowing for customized payment terms and other arrangements that suit both the vendor and the vendee’s needs.

Availability: For buyers who have difficulty obtaining financing from traditional lenders due to factors such as a low credit score or self-employment, a land contract can provide an alternative pathway to homeownership.

Faster Closing: Land contracts can be processed more quickly than traditional mortgage loans, as they do not require lengthy mortgage application processes or approval from a financial institution.

No Prepayment Penalty: Many land contracts do not have penalties for early prepayment, allowing the vendee to pay off the balance of the contract without additional fees.

Limitations and Risks

Legal Risk: If the vendor defaults on their obligations or fails to convey the legal title after the vendee satisfies the terms of the land contract, the vendee may need to initiate legal action to protect their rights.

Financial Risk: If the vendee defaults on their payments, they risk losing their equitable title and any funds paid towards the property.

Higher Interest Rates: Interest rates in land contracts are often higher than those offered by traditional lenders, which could lead to higher overall costs for the vendee.

Balloon Payment: If the land contract contains a balloon payment, the vendee may face difficulty securing alternative financing or need to make other arrangements to pay the remaining balance.

Before entering into a land contract, both vendors and vendees should carefully assess the risks and consult with real estate professionals and legal advisors to protect their interests.

Types of Land Contracts

Land contracts, also known as land installment contracts, are a type of financing method for people who want to purchase a property without obtaining a traditional mortgage from a bank or other financial institution.

Land contracts allow the buyer to make monthly payments directly to the seller instead of a bank, with the seller essentially acting as the lender.

There are various types of land contracts, each suited for different types of property transactions. We will discuss four major types of land contracts: installment contracts, lease purchase contracts, option contracts, and contracts for deeds.

Installment Contracts

Installment contracts, also known as installment sales, are a common type of land contract. They involve a buyer and a seller agreeing on a purchase price for a property, with payment terms typically spread out over a set period. The buyer makes installment payments to the seller according to the agreed-upon terms, and upon successful completion of all payments, ownership of the property is transferred from the seller to the buyer.

Installment contracts are particularly useful for buyers who do not have enough money saved for a significant down payment or have difficulty obtaining a mortgage loan. These contracts afford the buyer time to make monthly payments, typically including interest, toward the purchase price of the property.

Essentially, they act as a form of “ rent -to-own” arrangement, with the buyer gradually building equity in the property as they make their payments.

Lease Purchase Contracts

Lease purchase contracts, also known as lease-to-own agreements or rent-to-own contracts, are similar to installment contracts in that they allow a buyer to make regular payments toward the purchase of a property. However, instead of making installment payments on the purchase price, the buyer pays rent to the seller for the property, with a portion of the rent applied toward the purchase price.

Typically, a lease purchase contract includes an option for the buyer to purchase the property at a specified price after a certain period, during which the buyer has been making rental payments. If the buyer exercises this option at the end of the lease term, the applied rental credits can be used as part or all of the down payment for the purchase.

Lease purchase contracts can be beneficial for individuals who want to “test out” living in a property before committing to purchasing it or need time to improve their financial situation to qualify for a mortgage.

Option Contracts

Option contracts grant the buyer the exclusive right to purchase a property at a specific price within a specified period, without obligating the buyer to complete the purchase. In exchange for this exclusive right, the buyer usually pays the seller a non-refundable option fee, which may be applied toward the purchase price if the buyer decides to exercise the option.

Option contracts can provide flexibility for buyers, as they allow them to secure the right to purchase a property while they decide whether they want to buy it, secure financing, or identify a suitable time to complete the transaction. If the buyer does not exercise the option to purchase within the specified time frame, the seller retains the option fee and can pursue other buyers or keep the property.

Contract for Deed

A contract for deed, also known as a land contract or an agreement for deed, is an arrangement where the buyer and seller agree upon the purchase price, down payment, interest rate, and other terms, and the buyer makes monthly payments directly to the seller for a certain period. However, unlike a traditional installment contract, the seller retains legal title to the property until the final payment is made.

In a contract for deed, the seller acts as the lender, providing financing for the buyer. Once the buyer has completed all payments according to the contract terms, the seller will transfer the property title to the buyer.

This kind of contract can be beneficial for buyers who do not qualify for a traditional mortgage, as well as for sellers who may struggle to sell their property on the open market.

Overall, land contracts can offer significant flexibility for both buyers and sellers, allowing property transactions to occur even when traditional financing methods may be unavailable.

Each type of land contract has its own unique advantages and considerations, making it essential for both parties to conduct thorough research and consult with legal and financial professionals before entering into a contract.

Key Elements of a Land Contract

A land contract, also known as a contract for deed or installment sale agreement, is a method of financing the sale of real property between a buyer and seller. It allows the buyer to make a series of payments to the seller while living on and using the property. Once the agreed-upon price is paid in full, the seller then transfers the title to the buyer.

The following are the key elements of a land contract that parties should include when drafting the agreement.

Property Information

One of the essential elements of a land contract is a detailed description of the property being sold. This generally includes the property’s address, legal description, and tax identification number.

The legal description is crucial for clearly identifying the property being conveyed and can be obtained from a title or abstract report, county records, or a survey.

In addition to the legal description, it is essential to disclose any easements, restrictions, or encumbrances on the property, as this may impact the buyer’s intended use of the land.

Seller and Buyer Information

A land contract must identify the parties involved in the transaction – the seller(s) and buyer(s). Typically, this information includes the full names of the parties and their respective addresses.

If the buyer or seller is a corporation or limited liability company, the contract should include the entity’s name and state of formation.

If there are co-buyers, it is essential to define their ownership interests – for example, as joint tenants or tenants in common.

Purchase Price and Terms

A vital aspect of a land contract is the agreed-upon purchase price for the property. This should be explicitly stated in the contract, along with other cost-related terms such as the:

  • Required initial down payment (if any)
  • Amount of each installment payment
  • Number of installment payments
  • Final balloon payment (if applicable)

These terms should clarify the total purchase price and provide a clear understanding of the payment structure for both parties.

Payment Schedule for Land Contracts

The land contract should include a payment schedule that outlines when each installment payment is due. Payments are commonly made on a monthly basis but can also be set for other intervals, such as quarterly or semi-annually, depending on the agreement between the parties.

It is also essential to state the grace period allowed for late payments and any late fees that apply if a payment is not made within that timeframe.

Interest Rate and Calculations

The contract should specify the interest rate and any terms related to interest accrual or adjustments. It is crucial to clearly state whether the interest rate is fixed or variable and, if variable, how and when it can be adjusted. Moreover, the contract should outline how the interest portion of each payment will be calculated.

Prepayment Penalty

Some land contracts contain prepayment penalties, which are fees charged to the buyer if they pay off their obligation pursuant to the land contract ahead of schedule. If a prepayment penalty is included, the contract should clearly state the fee amount and any conditions under which it applies.

Due on Sale Clause

A due-on-sale clause is a provision within the land contract that requires the buyer to pay off any remaining balance in the event of the property’s sale or transfer to a third party.

This clause protects the seller’s interests by ensuring they receive payment in full upon the property’s disposition.

Establishing an Escrow Account

Lastly, a land contract may require the establishment of an escrow account to hold funds for property tax and insurance payments.

If this is the case, the contract should outline who (buyer or seller) is responsible for maintaining the escrow account, the amounts required to be deposited into the account, the schedule for depositing funds, and any requirements for reporting or maintaining account balances.

Understanding Legal Requirements

When starting or running a business , it is essential to understand the various legal requirements that apply to your company. These legal obligations can include federal laws, state laws, and county or local ordinances. Adhering to these standards is crucial for the successful and lawful operation of your business, as failure to comply can result in penalties and other repercussions.

Adhering to Federal Laws

Federal laws apply across the entire United States and cover areas such as labor, taxation, workplace safety, and environmental regulations. Here are some essential federal laws to be aware of when operating a business:

Tax Law: The Internal Revenue Service (IRS) enforces US tax laws for both individuals and businesses. Companies are required to pay federal income taxes and obtain an Employer Identification Number (EIN). Depending on the type of business, you may also need to collect sales tax and pay employment taxes such as Social Security, Medicare, and unemployment taxes. Tax requirements and deadlines vary, so it is essential to understand your tax obligations as a business owner.

Labor Law: Federal labor law covers various aspects of worker’s rights, including minimum wage, overtime pay, and child labor protections. Two major federal labor laws include the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA). Employers must be aware of these laws to ensure they are treating their employees fairly and lawfully.

Workplace Safety and Health Regulations: The Occupational Safety and Health Administration (OSHA) enforces federal laws to ensure a safe and healthy work environment for employees. OSHA sets and enforces standards for workplace safety, including training and recordkeeping requirements. Employers must be aware of and comply with these standards to avoid penalties and maintain a safe work environment for their employees.

Environmental Regulations: The Environmental Protection Agency (EPA) enforces federal environmental regulations. These laws oversee pollution control, hazardous waste disposal, and other environmental concerns that businesses may need to address. Companies must be aware of their environmental obligations to prevent fines and ensure compliance with federal guidelines.

Complying With State Laws

In addition to federal laws, businesses must also comply with state laws. These vary by state and can include additional labor laws, tax requirements, zoning regulations, and licensing requirements. Some key areas of state law to consider when operating a business include:

State Tax Law: In addition to federal taxes, companies generally need to pay state income and sales taxes. States may also impose additional taxes, such as property taxes, franchise taxes, or business licensing fees.

Employment Laws: State labor laws can include provisions for minimum wage, overtime pay, and paid time off, which may differ from federal standards. Employers must adhere to both federal and state labor laws to ensure compliance.

Business Registration, Licensing, and Permits: State requirements for registering a business, obtaining licenses, and securing permits can vary. Businesses must research and fulfill these state obligations to operate legally within their jurisdiction.

County and Local Ordinances

Finally, businesses must comply with county and local ordinances, which can include zoning regulations, noise ordinances, and building codes. These requirements may vary depending on the location of your business and the type of commercial activities you engage in.

Some local ordinances to consider include:

Zoning Regulations: Local zoning laws dictate where businesses can operate, the type of business activities permitted, and various requirements related to land use and development. It’s essential to understand and adhere to local zoning regulations when selecting a business location and planning any construction or expansion projects.

Building Codes: Local building codes ensure that businesses adhere to structural and safety standards in the construction and maintenance of commercial spaces. These codes may include specific requirements for accessibility, fire safety, and other health and safety considerations.

Licensing and Permits: Local governments may also require business licenses and permits, such as a health department permit for restaurants or a sign permit for storefronts. Be sure to research and obtain any necessary permits to operate legally within your jurisdiction.

By understanding and adhering to federal, state, and local legal requirements, you can minimize risks and ensure that your business operates legally and smoothly.

Drafting and Negotiating Land Contracts

A land contract, also known as a contract for deed or installment sale contract, is a legally binding agreement between a seller and a buyer for the purchase of real estate property. Entering into a land contract can be an attractive option for buyers who may be unable to obtain traditional financing or for sellers who are interested in a more flexible and direct financing option.

To ensure that the land contract is fair and legally enforceable, it is important to engage in proper drafting and negotiation processes including legal representation, due diligence, negotiation, and key contractual provisions.

Getting Legal Representation

Engaging the services of a skilled real estate attorney is crucial for both buyers and sellers in land contract transactions. Real estate attorneys can provide guidance and advice throughout the entire process, from drafting to negotiating and enforcing the land contract. They will ensure that the agreements are in accordance with local and state laws, as well as protect their clients’ interests.

Legal representation can also assist in resolving any disputes that may emerge between the parties during or after the negotiation process. Moreover, a knowledgeable attorney will be able to identify and deal with potential red flags, as well as address any complications that may arise during the closing process.

Conducting Due Diligence

Conducting due diligence is an essential part of the land contract process for both the buyer and seller. It refers to the investigation and research that buyers and sellers must undertake before entering into a legally binding agreement.

For the buyer, due diligence includes researching the property’s market value and condition. They should investigate the land’s title to ensure that there are no liens or encumbrances that could impact their ownership rights.

Buyers should also review zoning and land-use regulations, as well as obtain any necessary permits or approvals required for future development.

On the other hand, sellers must conduct due diligence by researching the buyer’s ability to make the required payments. They may want to conduct background checks, verify employment, and review the buyer’s financial statements and credit history to ensure their financial stability.

Negotiating the Land Contract

Negotiating a land contract is a critical step in ensuring that both parties are satisfied with the terms and conditions of the agreement. An experienced real estate attorney can aid in this process by assisting with negotiations, offering guidance on various aspects of the contract, and helping to facilitate communication between the parties.

Considerations during negotiation may include the purchase price, the down payment, monthly payment amounts and terms, the length of the contract, and the responsibility for taxes, insurance, and maintenance.

It is important for both parties to have a clear understanding of their respective rights, responsibilities, and obligations under the land contract.

Contractual Provisions in Land Contracts

A well-crafted land contract will include essential provisions that protect both the buyer’s and the seller’s interests. Some specific clauses that may need to be addressed in a land contract are:

Description of the property: This includes the legal description of the property, as well as any improvements, fixtures or appurtenances.

Purchase price and payment terms: The agreed-upon purchase price should be clearly outlined, along with the payment structure, interest rates, and balloon payment clauses if applicable.

Responsibilities for property taxes and insurance: The contract should specify who is responsible for payment of property taxes, insurance premiums, and any routine maintenance.

Default provisions: The contract should include measures to address default situations, such as the buyer’s failure to make timely payments or the seller’s failure to maintain clear title to the property.

Right to cure default: The parties should have the right to cure their default by paying outstanding obligations or addressing the underlying issue within a specified timeframe.

Transfer of title: The contract should delineate the conditions under which the title will be transferred to the buyer, such as payment of the full purchase price or meeting other contractual requirements.

In summary, drafting and negotiating a land contract requires careful planning, attention to detail, and professional assistance to ensure that the rights and interests of both parties are protected.

By engaging the services of an experienced real estate attorney and conducting thorough due diligence, buyers and sellers can increase the likelihood of a successful and equitable land contract transaction.

Default and Remedies

Default refers to the failure of a borrower to meet their financial obligations on time, either by not paying back a loan or failing to comply with other conditions specified in a loan agreement. When default occurs, there are various remedies that can be pursued by the lender. Let’s discuss several consequences of default as well as possible remedies for each scenario.

Consequences of Defaulting on a Loan

When a borrower defaults on their loan, the lender may take action to enforce the terms of the contract and protect their interests. Some common consequences of default may include:

Damage to the borrower’s credit score: Default can have a significant negative impact on the borrower’s credit rating, making it more difficult to obtain credit in the future.

Collection efforts: The lender may engage in collection efforts, using legal means (such as lawsuits) or hiring collection agencies to collect the debt from the borrower.

Acceleration: The lender may declare the entire outstanding balance of the loan due immediately, rather than waiting for scheduled payments.

Loss of collateral: If the loan is secured by collateral, the lender may take possession of the collateral property to recover the outstanding debt.

Additional fees and charges: Late fees, interest charges, and other fees may accumulate over time, increasing the borrower’s overall debt.

Forfeiture of Possession

Forfeiture is one of the remedies available to a lender when a borrower defaults on their secured loan. Under forfeiture, the lender takes possession of the property used as collateral for the loan. This often occurs when the borrower is unable to make the required payments on the loan, whether due to financial hardship or other reasons.

Once the lender takes possession of the collateral, they may sell the property to recoup the outstanding debt. The borrower may have the right to redeem the property before the sale, by paying off the outstanding debt and any fees. However, if the property is sold, and the proceeds do not cover the entire outstanding debt, the borrower may still be liable for the remaining balance.

Foreclosure of Property

Foreclosure is another remedy available to lenders when a borrower defaults on a mortgage loan. In a foreclosure, the lender legally takes ownership of the property used as collateral for the loan.

This process typically involves a court-supervised sale of the property, with proceeds from the sale being used to repay the debt.

The lender may either foreclose judicially or nonjudicially, depending on the state’s laws and the terms of the loan agreement. Judicial foreclosure involves a court proceeding, while nonjudicial foreclosure relies on a private trustee sale without court involvement.

Once the foreclosure process is complete, the borrower loses all rights to the property. In some cases, the borrower may also be liable for a deficiency judgment if the sale proceeds do not cover the entire outstanding debt.

Reinstatement of the Loan

Reinstatement is a remedy available to borrowers who have defaulted on their loans and wish to bring the loan current. Under reinstatement, the borrower pays the outstanding missed payments, fees, and interest charges in a lump sum to the lender. This action effectively “cures” the default and allows the borrower to resume their regular loan payments.

Typically, there is a limited timeframe during which the borrower can reinstate their loan, sometimes referred to as a “right to cure” or “right to reinstate” period. This period is often provided by state law or specified in the loan agreement.

It is important for borrowers to be aware of this timeframe, as once the reinstatement period expires, the lender may proceed with other remedies, such as foreclosure.

In conclusion, default on a loan has significant consequences for both the borrower and the lender. Various remedies, such as forfeiture, foreclosure, and reinstatement, can be pursued to address these consequences.

Borrowers should strive to meet their financial obligations to avoid default, and lenders should work with borrowers to resolve issues before pursuing these remedies.

Transfer and Assignment of Land Contracts

Land contracts, also known as installment sale contracts, land installment contracts, or contracts for deed, are agreements between a seller and buyer for the purchase of real property. The seller holds the legal title to the property, while the buyer makes regular payments to the seller over time, similar to a mortgage, until the purchase price is paid in full. Upon completion of the payments, the seller transfers the legal title to the buyer.

Land contracts are commonly used for real estate transactions, especially in situations where traditional bank mortgages may not be available or desirable.

There are situations where one or both of the parties involved in a land contract may wish to transfer or assign their rights and obligations to another party. Below, we will discuss selling land contracts, partial sales and assignments, and the associated risks and benefits of transfers.

Selling a Land Contract

Selling a land contract involves the transfer of the legal title to the property, along with the remaining payment obligations from the current seller (the original owner of the property) to a new buyer. The transfer typically requires the consent of the current buyer (the person making installment payments) and may be subject to specific terms and conditions set forth in the original land contract (such as a right of first refusal).

To sell a land contract, the parties should review the original land contract terms and seek professional advice to ensure compliance with all applicable legal and tax requirements. A written assignment or transfer agreement is usually required, detailing the rights and obligations of each party, including the payment schedule, interest rate, and other associated terms.

The transfer agreement is often recorded at the local county recorder’s office, to provide public notice of the change in ownership of the land contract.

Partial Sales and Assignments of Land Contracts

In some cases, a land contract holder (the seller/original owner) may want to assign or sell only a portion of their rights and obligations under the contract. This could involve selling a specific portion of the remaining payments owed, or assigning only a percentage of the future payments to another investor.

Partial sales and assignments are more complex than complete transfers, and careful consideration should be given to the legal and tax implications. The rights and obligations assigned or sold should be outlined in detail, and the remaining rights should be addressed in both the original land contract and the assignment or transfer agreement.

If the current buyer is cooperative, partial sales or assignments can provide a valuable source of cash for the seller, potentially enabling them to invest in other real estate or business opportunities.

It is important to work with experienced professionals familiar with land contracts, tax laws, and title issues in order to properly structure and document the transaction.

Risks and Benefits of Transferring Land Contracts

Transferring or assigning a land contract comes with various risks and benefits for all parties involved.

For the original land contract seller, the benefits often include receiving a lump sum payment for the value of the land contract or sharing the risk and reward of the future payments with a new investor. The current buyer, on the other hand, does not see a direct financial benefit from the transfer but may gain a more stable and professional counterpart to work with, especially if the original seller was an individual with limited resources.

The primary risk for the original seller is the potential loss of control over the property and the future receipt of payments. If the new buyer or investor fails to fulfill their obligations, enforcing the terms of the contract may require legal remedies, which can be costly and time-consuming.

For the new buyer or investor, the risks include the potential default of the current buyer on their payment obligations, as well as any unforeseen issues with the property, such as title defects, zoning restrictions, or environmental liabilities.

Thorough due diligence, including a review of the payment history, creditworthiness of the current buyer, and research on the property itself, can help to mitigate these risks.

In conclusion, transferring or assigning a land contract is a complex transaction that involves various risks and benefits for all parties involved. Proper structuring, documentation, and due diligence are crucial to ensure a successful outcome.

It is always advisable to work with experienced professionals familiar with land contracts, tax laws, and title issues when considering transferring or assigning a land contract.

Land Contract Disputes and Resolutions

Land contract disputes are common and can arise for various reasons. These disputes typically involve matters such as purchase and sale agreements, property boundaries, easements, and adverse possession claims.

Resolving land contract disputes is essential for both parties to protect their rights and prevent potential financial and legal consequences. Dispute resolution methods, such as mediation, arbitration, and litigation, are available to handle the complexities of land contract disputes.

Let’s examine common disputes, mediation and arbitration, and litigation as dispute resolution methods.

Common Land Contract Disputes

There are several types of land contract disputes that parties may encounter:

Contract interpretation: Conflicting interpretations of the terms and conditions of the land contract may lead to disputes between the parties. This typically involves disagreements over the meaning of specific clauses, provisions, or ambiguous language within the contract.

Property boundary disputes: Boundary disputes arise when the exact location of property lines is unclear or contested. This may occur due to outdated or inaccurate surveys, conflicting legal descriptions, or encroachments by neighboring property owners.

Easement disputes: An easement is a legal right to use another person’s property for a specific purpose. Disputes may arise if there are conflicting understandings of the easement’s scope and its permitted uses, or if one party claims a prescriptive easement (an easement obtained through continuous, open, and notorious use of another’s property without the owner’s permission).

Title disputes: These disputes involve ownership claims and issues with the chain of title (the historical sequence of legal transfers of the property). Inadequate or fraudulent title searches, forgery, and undiscovered liens can lead to title disputes.

Adverse possession claims: When an individual occupies and treats another person’s property as their own for a specific statutory period without the legal owner’s permission, adverse possession disputes emerge. In some cases, the occupier may gain legal ownership of the property, depending on the jurisdiction’s laws.

Mediation and Arbitration for Dispute Resolution

Mediation and arbitration are alternative dispute resolution methods that parties may use to resolve land contract disputes without resorting to litigation. Both methods can be more affordable, efficient, and flexible alternatives to court proceedings.

Mediation: In mediation, a neutral third party (the mediator) assists the disputing parties in negotiating a settlement. The mediator helps facilitate communication, identify common interests, and propose solutions. However, the mediator cannot impose a binding agreement on the parties. Instead, the parties must voluntarily consent to any proposed settlement.

Arbitration: Arbitration is a more formal process than mediation but still less formal than litigation. The parties agree to submit their dispute to an impartial arbitrator or panel of arbitrators. The arbitrator examines the evidence presented, applies the relevant law, and issues a binding award or judgment. Arbitration decisions are typically final, with limited grounds for appeal.

Litigation as a Means of Dispute Resolution

If alternative dispute resolution methods fail, litigation may be the last resort for resolving land contract disputes. In some cases, the parties may also choose to initiate litigation from the outset if they believe it is the best approach for their specific situation.

Court proceedings: The parties involved in a land contract dispute will present their respective cases to a judge or jury in a court of appropriate jurisdiction. The court will consider the evidence submitted, hear arguments, and apply relevant laws to make a binding decision.

Appeals: If a party disagrees with the court’s judgment, they may appeal the decision to an appellate court.Appellate courts review decisions made by lower courts for any legal errors, such as misinterpretation of the law or procedural mistakes. However, the appellate courts typically will not re-evaluate the facts of the case or overturn the lower court’s decision based on mere disagreement with the outcome.

Resolving land contract disputes can be a complicated and arduous process. The parties involved should consider consult legal professionals to guide them through the various options available and determine the most suitable dispute resolution method for their specific situation.

Taxes and Recordkeeping

Tax compliance and recordkeeping are essential responsibilities for individuals, households, and business entities. A failure to maintain accurate financial records or adhere to tax obligations can lead to a host of legal and financial consequences.

Let’s explore the various tax implications, income tax reporting, property tax responsibilities, and the need for keeping accurate records.

Various Tax Implications of Recordkeeping

There are several types of taxes imposed on individuals and business entities at various levels, including federal, state, and local taxes. Depending on the individual’s circumstances or the nature of the business, one may be subject to income tax, property tax, sales tax, payroll tax, and many others.

Income tax is a percentage levied on income earned by individuals and businesses. It is the primary source of revenue for the federal government and is used to fund public services and infrastructure. Income tax rates vary according to income levels, filing status, and other factors.

Property tax is assessed on real property, such as land, buildings, and other fixed assets. It is usually administered at the local level, with rates varying by jurisdiction. Property tax helps fund local services, such as public schools, law enforcement, and emergency services.

Sales tax is imposed on sales of goods and some services. It is collected by retailers and remitted to the state or local government. Some jurisdictions also impose use tax on goods purchased from out-of-state retailers.

Payroll tax is a tax on wages, salaries, and other forms of compensation paid to employees. It is generally split between employers and employees and is used to fund social insurance programs, such as Social Security and Medicare.

Income Tax Reporting

Income tax reporting is the process of preparing and filing an annual tax return, which details an individual’s or business’s income, deductions, credits, and tax liability. In the United States, the Internal Revenue Service (IRS) is the primary agency tasked with administering income tax.

There are different filing requirements and tax forms for individuals, businesses, and other entities like estates and trusts. For most individuals, the deadline for filing an annual income tax return is April 15.

When filing their tax returns, taxpayers must report all taxable income, including wages, salaries, interest, dividends, and capital gains. Taxpayers can also claim deductions and credits to reduce their taxable income and overall tax burden.

Deductions may include mortgage interest, state and local taxes, charitable contributions, and unreimbursed business expenses. Credits directly reduce the amount of tax owed and may include the Child Tax Credit, Earned Income Tax Credit, and education-related tax credits.

Property Tax Responsibilities of Property Owners

Property tax is imposed by local governments and paid by property owners. Taxing jurisdictions, such as cities, counties, and school districts, determine the tax rates and assessed property values. Tax rates can vary widely by jurisdiction, and assessments are typically based on a percentage of the property’s market value.

Property owners must pay property tax on a recurring basis, typically annually or semi-annually. Failure to pay property taxes can result in penalties, interest, and ultimately the loss of the property through tax foreclosure or tax lien sales.

It is essential to stay informed about local property tax laws and the assessment and appeal process. If a property owner believes that their property has been over-assessed or incorrectly classified, they may have the right to appeal the valuation, which can result in a reduction in taxes.

Keeping Accurate Records and Documentation

Accurate recordkeeping is critical to comply with tax laws and minimize the risk of audits, financial penalties, and legal issues. Taxpayers should maintain records of all income, expenses, deductions, and credits, as well as any supporting documentation, such as receipts, invoices, canceled checks, and bank statements.

For businesses, maintaining proper financial records includes tracking income and expenses, recording transactions, and retaining supporting documentation. It also involves maintaining and storing accurate employee records, payroll, and benefits information.

Keeping accurate records can help taxpayers and businesses comply with tax laws, prepare financial statements, monitor their financial progress, and manage cash flow. It can also help in preparing and filing accurate tax returns, substantiating claims for deductions and credits, and resolving disputes with tax authorities.

In summary, understanding the different types of taxes, complying with income tax reporting requirements, fulfilling property tax responsibilities, and maintaining accurate financial records are crucial for individuals and businesses alike.

Proper tax compliance and recordkeeping are necessary to avoid legal and financial problems and ensure a smooth and successful tax filing process.

Land Contracts FAQs

What is a land contract and how does it work.

A land contract, also known as a contract for deed or installment sale agreement, is a financing method used for purchasing real estate. The seller finances the sale and retains legal title, while the buyer takes possession and makes payments. Transfer of the title occurs after the buyer pays the agreed-upon amount (Molinsky, 2014).

Are land contracts a good alternative to traditional mortgages?

Land contracts can be a viable alternative for buyers who cannot secure a traditional mortgage. It allows them to purchase property without involving a bank or other lending institution. However, the buyer should carefully review the terms and ensure they can make the required payments before entering into the agreement (MacLaurin, 2016).

What are the risks and benefits of a land contract for buyers?

Benefits for buyers include easier qualification, potentially lower closing costs, and fewer origination fees. Risks involve the possibility of default, resulting in loss of investment and property, and the seller not holding a clear title or failing to make mortgage payments themselves (MacLaurin, 2016).

What are the risks and benefits of a land contract for sellers?

Benefits for sellers include a potentially faster sale, retaining the title as collateral, and earning interest on the loan balance. Risks involve the need to repossess the property in case of buyer default, which may involve legal action, and a lack of immediate lump-sum payment (Molinsky, 2014).

Can a land contract be refinanced or modified?

Yes, a land contract can be refinanced or modified through mutual agreement between the buyer and seller. In many cases, a buyer may seek to refinance through a traditional bank loan, allowing them to obtain the title and pay off the remaining balance with the seller directly (Federman, 2012).

What happens if the buyer defaults on a land contract?

If the buyer defaults on a land contract, the seller may repossess the property, usually through a process called forfeiture. Depending on the terms of the contract and state laws, the buyer may lose all rights to the property and any equity built up during the contract term (Molinsky, 2014).

References: Federman, M. (2012). Seller-financing restrictions under Dodd-Frank. Probate & Property, 26(1), 1–3. MacLaurin, J. A. (2016). Installment land contracts: The pitfalls for homeowners. Probate & Property, 30(4), 1–4. Molinsky, A. (2014). Homeownership in the United States: A primer on government-supported single-family mortgage finance. Probate & Property, 28(6), 1–5.

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Carlos Reyes

As a native Washingtonian, Carlos Reyes’ journey in the real estate industry began more than 15 years ago when he started an online real estate company. Since then, he’s helped more than 700 individuals and families as a real estate broker achieve their real estate goals across Virginia, Maryland and Washington, DC. Carlos now helps real estate agents grow their business by teaching business fundamentals, execution, and leadership.

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assignment of vendor's interest in land contract

Twelve Things You Forgot About Using Land Contracts

Twelve Things You Forgot

With more land contracts in use recently, a land contract refresher is in order! A land contract may be used when the seller finances the buyer’s purchase of the property. The land contract buyer pays the seller in installments and receives a deed when all payments have been made. As an alternative to the seller giving a deed and taking back a mortgage, the land contract seller reserves title to the property as security. The parties may use a land contract to negotiate a sale when conventional financing is not available to the buyer or is not feasible. 

1. What is a land contract? 

A land contract is a form of seller financing. It is a written agreement by which a seller, or “vendor,” promises to convey the seller’s property to the purchaser, or “vendee,” if the vendee makes payments under an installment payment plan. 

The land contract purchaser takes possession of the real estate and promises to make installment payments of principal and interest, typically on a monthly basis, until the contract is paid in full. Often there is a large payment due at the end of the term and the purchaser may need to secure traditional financing or find another source to make the final balloon payment. 

2. What is the difference between legal title and equitable title? 

A common misconception among parties to land contracts is that the “sale” has not yet occurred because a deed has not yet been given. Actually, the sale of the property occurs when the land contract is executed and possession is delivered to the buyer.

During the term of the contract, the purchaser has “equitable title” to the property and takes physical possession. The purchaser becomes, for all practical purposes, the owner of the real estate. 

The vendor has legal title to the property until the contract is paid in full and then must convey the property by deed to the purchaser. Under Wisconsin law, the seller has conveyed his ownership interest in the property and retains “bare legal title” as the seller’s security interest in the property. The vendor retains legal title, but that title is really only held as security for payment.

3. What are some advantages for the seller?

A land contract can attract buyers who face various obstacles in qualifying for traditional mortgage loan financing. The seller may also be able to attract a broader range of potential buyers by offering land contract financing. Enforcement of a land contract is somewhat easier than enforcement of a mortgage, but the seller assumes the risk that he or she will have to retake the property and resell it.

4. What are some advantages for the buyer? 

A land contract allows a buyer who is not able to secure traditional financing to purchase real estate. The buyer has time to work on any credit issues he may have, including lowering his debt-to-income ratio, and to save for the down payment on a traditional loan used to make the balloon payment on the land contract. Land contracts are also used when the buyer is related to the seller. 

5. Is there a problem under the SAFE Act for brokers drafting offers calling for land contracts?

Changes to the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act) were made in Wis. Stat. §§ 224.71-224.77 to remove many of the prior seller financing limitations on agents drafting seller financing offers as well as sellers providing seller financing when selling their own properties. There is now an exemption for sellers not regularly engaged in the business of a loan originator who occasionally offer seller financing on five or fewer transactions per calendar year. The same is true for a broker writing offers on five or fewer transactions where seller financing is offered.

Another new exemption in Wis. Stat. § 224.71(13) is intended to exempt real estate brokers who are engaged solely in the practice of real estate brokerage and use state-approved forms. Brokers will not be required to register as mortgage loan originators if they negotiate offers with seller financing as long as they use the forms approved under Wis. Admin. Code § REEB 16.03. That rule approves real estate licensees to use the forms such as the WB forms approved by the REEB; forms prepared and approved by the state bar of Wisconsin including deeds, mortgages and land contracts; out-of-state forms for out-of-state real estate and business transactions; and forms prepared by government agencies such as the FHA or VA. 

6. Are there approved forms for a land contract?

Yes, the State Bar of Wisconsin has a standardized form of land contract known as a “Form 11 Land Contract.” 

7. Can all licensees draft a land contract?

No, only those licensed as a Wisconsin real estate broker may use the State Bar forms. Wis. Admin. Code § REEB 16.03(1)(a) allows brokers to use forms prepared and approved by the State Bar of Wisconsin for deeds, mortgages, mortgage notes, land contracts, release of mortgage, satisfaction of mortgage, assignment of mortgage and assignment of land contract. That same privilege does not extend to those with a real estate salesperson’s license. 

Brokers, however, should be cautious about inadvertently providing legal advice to parties. As always, if the parties have questions about what is best for their personal financial, tax or legal situation, they should be urged to consult with their financial, tax and legal advisors.

8. What is the best way to draft an offer for a land contract?

In the typical Wisconsin residential land contract transaction, the owner of the property first enters into an offer to purchase with the buyer contingent on the seller agreeing to provide land contract financing. The key when drafting the offer to purchase for a land contract transaction is to have the parties agree on all of the terms and conditions that will be needed to complete the land contract document at closing. Land contract terms and conditions may be addressed in the Additional Provisions sections of the offer forms or in addenda. 

The offer might include a land contract rider specifying the terms of a land contract. The WRA Land Contract Rider, which is WRA form number WRA-LCR, spells out the terms the buyer wants in the land contract and may raise additional details the parties have not yet considered. An offer for a land contract may also be achieved by completing a Form 11 Land Contract, except for signatures, and using it as an addendum to the offer.

9. What is a “due on sale” clause? 

If the land contract seller has a mortgage on the property being sold and does not obtain the consent of the mortgage holder regarding the land contract sale, the “due on sale” clause in the mortgage may require the land contract seller to pay the total remaining balance due on the mortgage as soon as equitable title is transferred. Therefore, it is crucial for the seller to consult with the mortgage holder and obtain written consent to the land contract sale. Sellers with questions about this should be referred to their attorneys for legal advice!

10. Is a land contract recorded with the register of deeds?

The land contract is recorded with the register of deeds, giving notice to all of the vendee’s interest in the real estate and the vendor’s obligation to convey the real estate upon full payment. The transfer fee is due at the time the land contract is recorded, along with a transfer return. When the buyer conveys the real estate by deed, no additional transfer fee is collected, although another transfer return will need to be filed.

11. Do land contracts affect the payment of commission? 

Because the seller in a land contract transaction is not receiving the full sales price upon execution of the land contract, there can be issues with commissions that may need to be worked out with the seller. The listing contract states, for instance, on lines 64-65 of the WB-3 Vacant Land Listing Contract, “Once earned, the Firm’s commission is due and payable in full at the earlier of closing or the date set for closing, even if the transaction does not close, unless otherwise agreed in writing.” The firm’s commission is earned if the seller “sells or accepts an offer which creates an enforceable contract for the sale of all or any part of the Property” at line 53 or if “a transaction occurs which causes an effective change in ownership or control of all or any part of the Property” at line 56. The closing for a land contract conveys the equitable ownership interest in the property, hopefully creates an enforceable contract for the sale of the property, and thus triggers the seller’s commission obligation. The execution and recording of a land contract also represents an effective change in ownership or control because the land contract buyer is treated as the owner while the seller is treated as the secured party.

If the buyer’s down payment under the land contract is not enough to pay the listing firm’s commission, the sellers and the listing firm can look for other solutions. For example, the sellers may offer to pay part of the commission after the terms of the land contract are fulfilled. If the listing firm agrees to the sellers’ proposal, this should be documented in an amendment to the listing contract. Sellers might also give the firm a promissory note for the remaining commission due. Other arrangements may also be made as long as the sellers and the listing firm agree, and they commit their agreement to writing. 

12. How is a land contract enforced? 

The parties to a land contract can negotiate their own remedy to end the land contract relationship. This typically will involve the buyer quitclaiming the property back to the seller. The seller first should confer with legal counsel to examine any liens that may have attached to the buyer’s interest in the property — it must be determined whether the liens will survive and continue to apply to the property if the buyer deeds it back to the seller. If the buyer has significant liens, the seller may choose to foreclose in order to remove the “hitchhiker” liens from title. 

The seller may declare the land contract to be at an end and file a quiet title action to remove the land contract as a cloud on the seller’s title to the property. This remedy generally is only used if the buyer’s equitable interest in the property is insignificant.

The seller can sue the buyer for the money owed and get a money judgment. The acceleration clause in the Wisconsin State Bar Form No. 11 Land Contract makes it possible for the seller to declare the entire outstanding balance to be immediately due and sue for the balance if the buyer defaults on just one installment payment. This remedy allows the seller to quickly obtain a money judgment against the buyer.

The seller also can sue for foreclosure by sale, usually called “specific performance.” This is similar to a mortgage foreclosure. The court establishes the redemption period in the foreclosure judgment. The court has a certain amount of discretion in fixing the redemption period, which may be as short as two months. If the buyer does not pay the balance, the sheriff sells the property at public sale. If the property does not bring in as much as the buyer owes, there may be a deficiency judgment against the buyer for the unpaid balance.

It may be more likely that a land contract seller will ask for a strict foreclosure. The seller who chooses this remedy has elected to rescind the contract, so he or she cannot get a deficiency judgment for the unpaid balance due on the contract. The seller gets his or her property back and keeps payments already made. There is no sheriff’s sale. Costs may be less than those for a mortgage foreclosure, and the time required to complete the strict foreclosure is usually less than for mortgage foreclosure.

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA. 

March 2014 Legal Update , “Legislative Update 2014,” at www.wra.org/LU1403 .

“SAFE At Last: New law removes mortgage loan originator licensing requirements for sellers and REALTORS ® ” in the May 2014 Wisconsin Real Estate Magazine at www.wra.org/WREM/May14/Safe . 

January 2001 Legal Update , “Land Contract Financing,” at www.wra.org/LU0101 . 

July 2008 Legal Update , “Using Land Contracts and Leases with Options,” at www.wra.org/LU0807 . 

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General Principles of Assignments in Real Estate Transactions

Assume a seller, ABC Company, enters into a contract to sell a parcel of land (referred to here as “Blackacre”) to Ms. Green. Ms. Green subsequently assigns her interest in the contract to Mr. Smith. Such assignments of contracts of purchase and sale raise a number of practical issues—e.g. notice to the seller, payment for the assignment, and transfer of the deposit—that affect not only the seller but also the original purchaser and the eventual purchaser. A party wishing to assign its interest in a contract of purchase and sale to a new party should not assume that the matter is as simple as entering into an assignment with the new party and then walking away and forgetting about the contract.

A real estate contract will often contain provisions that limit or prohibit an assignment of a party’s interest in the contract. If the contract is silent as to the rights to the parties to assign their interests in the contract, then the rights of the parties, with few exceptions, can be assigned. Normally, assignments of contracts relating to the purchase and sale of real estate involve the purchaser assigning its interest in the contract; however, it is not unheard of to have the seller assign its interest in the contract.

In our scenario, to be binding on it as the seller, ABC Company must be given notice of the assignment, although it does not have to receive a copy of the assignment or the business terms relating to the assignment. If ABC Company has been given notice that Ms. Green’s interest in the contract has been assigned, it may be concerned that she is ‘flipping’ her interest in the contract for a profit. Consequently, ABC Company may wish to seek advice as to whether the contract is enforceable.

Assuming that Mr. Smith is paying Ms. Green a specified amount of money for the assignment, the question arises as to when this money will be paid. Ms. Green will want the money to be paid when they enter into the assignment but Mr. Smith will want to pay at the time that they complete the purchase and sale of Blackacre. In most cases, the latter time period is the norm but, in any case, money paid for an assignment is subject to the Goods and Services Tax.

Ms. Green will likely have paid a deposit to ABC Company pursuant to the contract and will want the deposit to be repaid to her at the time of the assignment rather than having to wait until the purchase and sale of Blackacre is completed. It would not be unusual for Mr. Smith to reimburse the deposit to Ms. Green at the time that they enter into the assignment.

Mr. Smith should look to obtain assurances by way of representations and warranties from Ms. Green that the contract to purchase Blackacre is in full force and effect and that her interest can be assigned to him. In turn, Ms. Green should look to obtain representations and warranties from Mr. Smith that he will fulfill her obligations to complete the purchase of Blackacre since an assignment will not release Ms. Green of her obligations under the contract unless such release is specifically provided for—and has been agreed to by ABC Company.

Frequently, and contrary to the scenario presented here, a contract for a real estate transaction will often limit the right of the purchaser to assign its interest in the contract. A common limitation is that “. . . the purchaser may only assign its interest in the contract with the consent of the seller, such consent not to be unreasonably withheld.” In most cases, it would not be unreasonable for the seller to insist that the assignee contract directly with the seller to fulfill the obligations of the assignor under the contract so that, if there is a default, the seller has the right to seek remedies against both the assignor and the assignee.

So long as all parties to a contract of purchase and sale are aware of their rights and obligations, the completion of a purchase and sale where a contract has been assigned can and should proceed in a straightforward manner.

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Property Transfer Agreement


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What is a property transfer agreement.

A property transfer agreement, also known as a bill of sale, is a legal contract that transfers the ownership of real estate. A buyer and seller will agree to terms such as price, date of closing, financing arrangements, inspections, contingencies and deed requirements. The property transfer agreement documents the transfer of ownership of the asset in writing.

Property transfer agreements can be used outside of real estate as well. You can see them used for buying and selling businesses, intellectual property, purchasing equipment, and others non-real estate assets. It is important to legally document the transfer of ownership since most purchase agreements only document the terms of the transaction.

Common Sections in Property Transfer Agreements

Below is a list of common sections included in Property Transfer Agreements. These sections are linked to the below sample agreement for you to explore.

Property Transfer Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10 2 spinoutagreementdmpssg111209.htm ASSET PURCHASE, SALE AND TRANSFER AGREEMENT , Viewed October 12, 2021, View Source on SEC .

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assignment of vendor's interest in land contract

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Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

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assignment of vendor's interest in land contract

by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...


Updated on: November 24, 2023 · 3 min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

Person presenting documents to another person who is signing them

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

  • The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
  • The assignor must agree to assign their rights and duties under the contract to the assignee.
  • The assignee must agree to accept, or "assume," those contractual rights and duties.
  • The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

  • First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
  • All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
  • Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

  • Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
  • The effective date of the assignment and assumption agreement
  • Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
  • Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
  • Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
  • A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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Assignment provisions in contracts

Author’s note, Nov. 22, 2014: For a much-improved update of this page, see the Common Draft general provisions article .

(For more real-world stories like the ones below, see my PDF e-book, Signing a Business Contract? A Quick Checklist for Greater Peace of Mind , a compendium of tips and true stories to help you steer clear of various possible minefields. Learn more …. )

Table of Contents

Legal background: Contracts generally are freely assignable

When a party to a contract “ assigns ” the contract to someone else, it means that party, known as the assignor , has transferred its rights under the contract to someone else, known as the assignee , and also has delegated its obligations to the assignee.

Under U.S. law, most contract rights are freely assignable , and most contract duties are freely delegable, absent some special character of the duty, unless the agreement says otherwise. In some situations, however, the parties will not want their opposite numbers to be able to assign the agreement freely; contracts often include language to this effect.

Intellectual-property licenses are an exception to the general rule of assignability. Under U.S. law, an IP licensee may not assign its license rights, nor delegate its license obligations, without the licensor’s consent, even when the license agreement is silent. See, for example, In re XMH Corp. , 647 F.3d 690 (7th Cir. 2011) (Posner, J; trademark licenses); Cincom Sys., Inc. v. Novelis Corp. , 581 F.3d 431 (6th Cir. 2009) (copyright licenses); Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp. , 284 F.3d 1323 (Fed. Cir. 2002) (patent licenses). For additional information, see this article by John Paul, Brian Kacedon, and Douglas W. Meier of the Finnegan Henderson firm.

Assignment consent requirements

Model language

[Party name] may not assign this Agreement to any other person without the express prior written consent of the other party or its successor in interest, as applicable, except as expressly provided otherwise in this Agreement. A putative assignment made without such required consent will have no effect.

Optional: Nor may [Party name] assign any right or interest arising out of this Agreement, in whole or in part, without such consent.

Alternative: For the avoidance of doubt, consent is not required for an assignment (absolute, collateral, or other) or pledge of, nor for any grant of a security interest in, a right to payment under this Agreement.

Optional: An assignment of this Agreement by operation of law, as a result of a merger, consolidation, amalgamation, or other transaction or series of transactions, requires consent to the same extent as would an assignment to the same assignee outside of such a transaction or series of transactions.

• An assignment-consent requirement like this can give the non-assigning party a chokehold on a future merger or corporate reorganization by the assigning party — see the case illustrations below.

• A party being asked to agree to an assignment-consent requirement should consider trying to negotiate one of the carve-out provisions below, for example, when the assignment is connection with a sale of substantially all the assets of the assignor’s business {Link} .

Case illustrations

The dubai port deal (ny times story and story ).

In 2006, a Dubai company that operated several U.S. ports agreed to sell those operations. (The agreement came about because of publicity and political pressure about the alleged national-security implications of having Middle-Eastern companies in charge of U.S. port operations.)

A complication arose in the case of the Port of Newark: The Dubai company’s lease agreement gave the Port Authority of New York and New Jersey the right to consent to any assignment of the agreement — and that agency initially demanded $84 million for its consent.

After harsh criticism from political leaders, the Port Authority backed down a bit: it gave consent in return for “only” a $10 million consent fee, plus $40 million investment commitment by the buyer.

Cincom Sys., Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009) (affirming summary judgment)

A customer of a software vendor did an internal reorganization. As a result, the vendor’s software ended up being used by a sister company of the original customer. The vendor demanded that the sister company buy a new license. The sister company refused.

The vendor sued, successfully, for copyright infringement, and received the price of a new license, more than $450,000 as its damages. The case is discussed in more detail in this blog posting.

The vendor’s behavior strikes me as extremely shortsighted, for a couple of reasons: First, I wouldn’t bet much on the likelihood the customer would ever buy anything again from that vendor. Second, I would bet that the word got around about what the vendor did, and that this didn’t do the vendor’s reputation any good.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, No. 5589-VCP (Del. Ch. Apr. 8, 2011) (denying motion to dismiss).

The Delaware Chancery Court refused to rule out the possibility that a reverse triangular merger could act as an assignment of a contract, which under the contract terms would have required consent. See also the discussion of this opinion by Katherine Jones of the Sheppard Mullin law firm.

Assignment with transfer of business assets

Consent is not required for an assignment of this Agreement in connection with a sale or other disposition of substantially all the assets of the assigning party’s business.

Optional: Alternatively, the sale or other disposition may be of substantially all the assets of the assigning party’s business to which this Agreement specifically relates.

Optional: The assignee must not be a competitor of the non-assigning party.

• A prospective assigning party might argue that it needed to keep control of its own strategic destiny, for example by preserving its freedom to sell off a product line or division (or even the whole company) in an asset sale.

• A non-assigning party might argue that it could not permit the assignment of the agreement to one of its competitors, and that the only way to ensure this was to retain a veto over any assignment.

• Another approach might be to give the non-assigning party, instead of a veto over asset-disposition assignments, the right to terminate the contract for convenience . (Of course, the implications of termination would have to be carefully thought through.)

Assignment to affiliate

[Either party] may assign this Agreement without consent to its affiliate.

Optional: The assigning party must unconditionally guarantee the assignee’s performance.

Optional: The affiliate must not be a competitor of the non-assigning party.

Optional: The affiliate must be a majority-ownership affiliate of the assigning party.

• A prospective assigning party might argue for the right to assign to an affiliate to preserve its freedom to move assets around within its “corporate family” without having to seek approval.

• The other party might reasonably object that there is no way to know in advance whether an affiliate-assignee would be in a position to fulfill the assigning party’s obligations under the contract, nor whether it would have reachable assets in case of a breach.

Editorial comment: Before approving a blanket affiliate-assignment authorization, a party should consider whether it knew enough about the other party’s existing- or future affiliates to be comfortable with where the agreement might end up.

Consent may not be unreasonably withheld or delayed

Consent to an assignment of this Agreement requiring it may not be unreasonably withheld or delayed.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are to be treated as direct damages.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are not subject to any exclusion of remedies or other limitation of liability in this Agreement.

• Even if this provision were absent, applicable law might impose a reasonableness requirement; see the discussion of the Shoney case in the commentary to the Consent at discretion provision.

• A reasonableness requirement might not be of much practical value, whether contractual or implied by law. Such a requirement could not guarantee that the non-assigning party would give its consent when the assigning party wants it. And by the time a court could resolve the matter, the assigning party’s deal could have been blown.

• Still, an unreasonable-withholding provision should make the non-assigning party think twice about dragging its feet too much, becuase of the prospect of being held liable for damages for a busted transaction. Cf. Pennzoil vs. Texaco and its $10.5 billion damage award for tortious interference with an M&A deal.

• Including an unreasonable-delay provision might conflict with the Materiality of assignment breach provision, for reasons discussed there in the summary of the Hess Energy case.

Consent at discretion

A party having the right to grant or withhold consent to an assignment of this Agreement may do so in its sole and unfettered discretion.

• If a party might want the absolute right to withhold consent to an assignment in its sole discretion, it would be a good idea to try to include that in the contract language. Otherwise, there’s a risk that court might impose a commercial-reasonableness test under applicable law (see the next bullet). On the other hand, asking for such language but not getting it could be fatal to the party’s case that it was implicitly entitled to withhold consent in its discretion.

• If a commercial- or residential lease agreement requires the landlord’s consent before the tentant can assign the lease, state law might impose a reasonableness requirement. I haven’t researched this, but ran across an unpublished California opinion and an old law review article, each collecting cases. See Nevada Atlantic Corp. v. Wrec Lido Venture, LLC, No. G039825 (Cal. App. Dec. 8, 2008) (unpublished; reversing judgment that sole-discretion withholding of consent was unreasonable); Paul J. Weddle, Pacific First Bank v. New Morgan Park Corporation: Reasonable Withholding of Consent to Commercial Lease Assignments , 31 Willamette L. Rev. 713 (1995) (first page available for free at HeinOnline ).

Shoney’s LLC v. MAC East, LLC, No. 1071465 (Ala. Jul. 31, 2009)

In 2009, the Alabama Supreme Court rejected a claim that Shoney’s restaurant chain breached a contract when it demanded a $70,000 to $90,000 payment as the price of its consent to a proposed sublease. The supreme court noted that the contract specifically gave Shoney’s the right, in its sole discretion , to consent to any proposed assignment or sublease.

Significantly, prior case law from Alabama was to the effect that a refusal to consent would indeed be judged by a commercial-reasonableness standard. But, the supreme court said, “[w]here the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ‘sole discretion’ is also to be construed as written.” Shoney’s LLC v. MAC East, LLC , No. 1071465 (Ala. Jul. 31, 2009) (on certification by Eleventh Circuit), cited by MAC East, LLC v. Shoney’s [LLC] , No. 07-11534 (11th Cir. Aug. 11, 2009), reversing No. 2:05-cv-1038-MEF (WO) (M.D. Ala. Jan. 8, 2007) (granting partial summary judgment that Shoney’s had breached the contract).

Termination by non-assigning party

A non-assigning party may terminate this Agreement, in its business discretion , by giving notice to that effect no later than 60 days after receiving notice, from either the assigning party or the assignee, that an assignment of the Agreement has become effective.

Consider an agreement in which a vendor is to provide ongoing services to a customer. A powerful customer might demand the right to consent to the vendor’s assignment of the agreement, even in strategic transactions. The vendor, on the other hand, might refuse to give any customer that kind of control of its strategic options.

A workable compromise might be to allow the customer to terminate the agreement during a stated window of time after the assignment if it is not happy with the new vendor.

Assignment – other provisions

Optional: Delegation: For the avoidance of doubt, an assignment of this Agreement operates as a transfer of the assigning party’s rights and a delegation of its duties under this Agreement.

Optional: Promise to perform: For the avoidance of doubt, an assignee’s acceptance of an assignment of this Agreement constitutes the assignee’s promise to perform the assigning party’s duties under the Agreement. That promise is enforceable by either the assigning party or by the non-assigning party.

Optional: Written assumption by assignee: IF: The non-assigning party so requests of an assignee of this Agreement; THEN: The assignee will seasonably provide the non-assigning party with a written assumption of the assignor’s obligations, duly executed by or on behalf of the assignee; ELSE: The assignment will be of no effect.

Optional: No release: For the avoidance of doubt, an assignment of this Agreement does not release the assigning party from its responsibility for performance of its duties under the Agreement unless the non-assigning party so agrees in writing.

Optional: Confidentiality: A non-assigning party will preserve in confidence any non-public information about an actual- or proposed assignment of this Agreement that may be disclosed to that party by a party participating in, or seeking consent for, the assignment.

The Delegation provision might not be necessary in a contract for the sale of goods governed by the Uniform Commercial Code, because a similar provision is found in UCC 2-210

The Confidentiality provision would be useful if a party to the agreement anticipated that it might be engaging in any kind of merger or other strategic transaction.

Materiality of assignment breach

IF: A party breaches any requirement of this Agreement that the party obtain another party’s consent to assign this Agreement; THEN: Such breach is to be treated as a material breach of this Agreement.

A chief significance of this kind of provision is that failure to obtain consent to assignment, if it were a material breach, would give the non-assigning party the right to terminate the Agreement.

If an assignment-consent provision requires that consent not be unreasonably withheld , then failure to obtain consent to a reasonable assignment would not be a material breach, according to the court in Hess Energy Inc. v. Lightning Oil Co. , No. 01-1582 (4th Cir. Jan. 18, 2002) (reversing summary judgment). In that case, the agreement was a natural-gas supply contract. The customer was acquired by a larger company, after which the larger company took over some of the contract administration responsibilities such as payment of the vendor’s invoices. The vendor, seeking to sell its gas to someone else at a higher price, sent a notice of termination, on grounds that the customer had “assigned” the agreement to its new parent company, in violation of the contract’s assignment-consent provision. The appeals court held that, even if the customer had indeed assigned the contract (a point on which it expressed considerable doubt) without consent, the resulting breach of the agreement was not material, and therefore the vendor did not have the right to terminate the contract.

See also (list is generated automatically) :

  • Notebook update: Reverse triangular merger might be an assignment of a contract, requiring consent Just updated the Notebook with a citation to a case in which the Delaware Chancery Court refused to rule out the possibility that a reverse...
  • Assignment-consent requirements can cause serious problems in future M&A transactions A lot of contracts provide that Party A must obtain the prior written consent of Party B if it wishes to assign the agreement to a...
  • SCOTX rejects implied obligation not to unreasonably withhold consent to assignment of contract In a recent Texas case, two sophisticated parties in the oil and gas busi­ness — let’s call them Alpha and Bravo — were negotiating a contract....
  • Ken Adams and the marketplace of ideas I (used to) comment occasionally at Ken Adams’s blog. Recent examples: Here, here, here, here, and here. Ken and I disagree on a number of issues; some...

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What Is a Land Contract In Ohio? Full Guide [2023 Update]

What is a Land Contract in Ohio?

  • Farmland or raw land
  • Multifamily housing
  • A commercial building
  • A home or condo

While a commercial land contract might be ideal for you, there are important details you need to know, first. So, what is a land contract agreement, and how does it work? Let us give you a lay of the land (pun intended)! Learn how you, the commercial real estate investor, can avoid the bank and make an agreement directly with the seller.

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What Is a Land Contract?

A land contract is a legal agreement between a buyer and seller where an installment payment is arranged for purchasing land or other real property. Unlike a mortgage where the buyer borrows money from a lender or bank to buy real property, a land contract is a seller-financed lending agreement; the buyer makes regularly scheduled payments to the seller until the property is paid in full. Either the full payment or a portion of it is deferred. The land contract may stipulate monthly payments until the entire amount is paid, or a final balloon payment may be due at the end.

Upon executing the agreement, the buyer acquires access to the property but the seller holds the legal title until the loan is paid off. Once the loan payments are satisfied, the seller legally transfers the title to the buyer; at this point, the buyer owns the property, free and clear. If a buyer fails to meet the terms of an installment land contract, they forfeit their legal rights to the property and any payments remitted. A seller can also regain legal possession of the real estate property through a forfeiture process or sometimes a foreclosure. Does a land contract have to be recorded? Yes, a land contract (Ohio-based and in other states) must be recorded shortly after the agreement is executed. We detail Ohio land contract laws in the sections, below.

Land contracts enable buyers who don’t have the best credit an alternative option to traditional financing, such as a mortgage. While land contracts are usually for the sale of vacant land, they’re also used to purchase other real estate properties such as a commercial building, an apartment building, a house, or other real property. When there’s a structure on the property, a land contract may include both the land and the property on the land. Now that you know the answer to the burning question, “What is a land contract?” we’ll dig deeper, below.

What Is Another Name for a Land Contract?

A land contract in Ohio is often called a land installment contract. Depending upon the legal or common real estate terminology in your area, you may see these types of land agreements referred to as the following terms:

  • Agreement for deed
  • Bond for title
  • Contract for deed
  • Deeds of trust
  • Installment land contract
  • Installment sale agreement
  • Installment sale contract
  • Land contract
  • Land installment contract
  • Land sale contract
  • Memorandums of contract
  • Real estate contract
  • Terms contract
  • Trust deeds

How Do Commercial Land Contracts Differ from Other Loan Agreements?

You may have noticed that a land contract sounds similar to a mortgage. The big difference is that you are not borrowing money from a bank or lender and paying back the purchase price plus your mortgage payments to the bank. Instead, you are paying these installments to the seller. As such, some investors that buy Ohio property for sale to flip consider offering a land contract for their real property.

Aside from direct payments from the buyer to the seller, commercial land contracts differ from other loan agreements, as follows:

  • Direct payments from buyer to seller . The buyer makes an initial down payment to the seller directly and then continues to pay monthly installments of the principal plus interest over a specified period. (Hence, the name land installment contracts.) The agreement is solely between the buyer and seller, and no bank or lender is involved.
  • Deed remains with the seller . While the buyer takes possession of the property, as with mortgages, the seller retains the deed and legal title to the property as security and collateral until the installment payments are fulfilled. At that time, the seller then transfers the deed to the buyer.
  • Obligation to buy . Unlike lease-to-own agreements, where lessees typically have the option to purchase the property at the end of the leasing term, a land contract requires the buyer to agree up-front to pay the full price of the real estate.
  • Equitable title for the buyer . Once the buyer begins making payments on commercial real estate under a land contract, the buyer carries an equitable title and financial interest in the property.

What Is the Difference Between a Land Contract and Lease-to-Own Agreement?

We’ve talked ad nauseam about land contracts (don’t worry, there’s more to come); so, what is a lease-to-own agreement? In a lease-to-own agreement, the buyer has the option to purchase the property at an agreed-upon price. It might be easier to think of the “buyer” as the “lessor” and the “seller” as the “lessee” because ownership is not changing hands.

On the flip side, a land contract is the sale of a property, where the seller finances the deal. So, what are the benefits of a lease-to-own agreement for the buyer? First and foremost, specific costs associated with the property, namely taxes and insurance, are not the buyer’s responsibility. In addition, there is no obligation to buy the property in a lease-to-own arrangement. As such, depending on the agreement’s specifics, the lessor can walk away if they are unsatisfied with the property.

For the seller or lessee, a lease-to-own agreement offers an “option-to-buy” fee at the execution of the contract to encourage the buyer to purchase the property eventually. And, while they are still responsible for taxes, insurance, mortgage payments, and maintenance fees on the property, the seller can more easily evict a buyer because they do not have any claim of ownership.

What Is a Commercial Ground Lease? And, Is It the Same as a Commercial Land Contract?

The words “ground” and “land” may be synonymous in the thesaurus; however, that’s where the similarities between a commercial ground lease and commercial land contract (in Ohio or other states) end. At its most basic level, a commercial ground lease is not a sale of land, but rather a rental of land to a tenant that plans to build on the property. A commercial ground lease is typically a long-term commitment (50-99 years).

Why would a tenant opt for a commercial ground lease? In most cases, tenants seek commercial ground leases for land in high-traffic or well-populated areas because often such land is cost-prohibitive. And, since the tenant desires to build on the land, they prefer to direct funds toward construction costs rather than upfront costs associated with a commercial real estate purchase.

A commercial ground lease allows the landowner to retain control of the land while enjoying a steady stream of income from the tenant. Furthermore, the tenant is responsible for all costs for improving the land, thus increasing the commercial property’s overall value.

Commercial Land Contracts Sound Too Good to Be True… What’s the Catch?

Many commercial real estate investors favor a commercial land contract in Ohio because they require less capital for a down payment than traditional loans. Also, since the property can start being utilized once the contract is signed, this method allows the investor to begin quickly using the property.

Commercial land contracts do not require involvement with banks, lenders, or real estate agents. Therefore, this makes them easier to obtain compared to traditional loans. Additional expenses from these third parties, such as credit underwriting and closing costs, are eliminated.

What Are the Benefits of Commercial Land Contracts?

A commercial land contract is an appealing option for both buyers and sellers regarding commercial real estate.

What are the advantages of a land contract for a buyer?

If you are a commercial real estate buyer (or investor), below are some benefits that you can reap through your commercial land contract:

  • Easier to obtain financing. Land contracts allow buyers to get a loan even if they aren’t approved for a traditional loan from a bank or lender.
  • High degree of protection . As the buyer, you can obtain the title insurance on the property and register the sale within the county, upfront. This will bring to light any restrictions or liens on the property, eliminating the possibility of the seller trying to sell the property to someone else over the 3-5 year contracted period.
  • Tax advantages . There are many tax advantages with commercial land contracts. Buyers can claim property taxes, the value of improvement projects (i.e., energy-efficient fixtures), and the mortgage interest as tax deductions.

What are the advantages of a land contract for a seller?

For commercial real estate sellers, land contracts can be just as attractive. Some seller benefits include:

  • Steady income stream. Through a land contract, the seller receives a steady income for the duration of the agreement.
  • Reduction in fees . In a commercial land contract, a seller can earn a proper selling price for the real estate property without the additional closing costs.
  • Maintenance and tax liability lifted . Commercial land contracts allow the buyer to inhabit the property immediately. While you, as the seller, still hold the deed and the legal title to the property, the buyer will usually adopt the responsibilities of both property maintenance and taxes.

And, What Are the Risks of Land Contracts for Buyers and Sellers?

What are the disadvantages of a land contract for a buyer.

As with any real estate investment, there are risks and challenges when executing land contracts in Ohio and any other state. Below are a few pitfalls for land buyers or other commercial real estate investors to consider. What is the main disadvantage of a land contract to sellers? See the first bullet point.

  • Higher interest rates. The seller may implement a higher interest rate since they bear most of the risk.
  • The possibility of still needing a loan . Some buyers may still need financial assistance towards the end of the stipulated period. That’s because the land contract typically has a “balloon payment” at the end of the agreement. Many buyers end up applying for financing at this point, in the form of a mortgage. However, suppose the buyer chose the land contract route initially because that buyer could not get approved for a traditional mortgage. In that case, they might be stuck in the same predicament if they cannot cover the remaining amount on their own.
  • No legal title . As the land buyer, you do not own the property until you have made your final payment. While you may inhabit the property, perform the upkeep, and pay the taxes, the property is not legally yours until the full price agreed upon in the contract is met. The buyer has an equitable title, not a legal title to the property. Seller risk comes into play here. If the seller defaults on their mortgage, the buyer risks nullifying the contract and facing eviction.
  • Risk of eviction . Until you have paid 20 percent of the purchase price, or made five years of payments, missing just one payment is grounds for eviction – just as if you were a tenant, renting. Also, if you are evicted from the property, you will lose not only your down payment but also any land installment payments made up until that point, as well as the value of any improvements you have made to the property.

What are the disadvantages of a land contract for a seller?

On the flip side, address the following key points if you enter a land contract as a seller.

  • The sale is not guaranteed . If the buyer defaults on your land contract, you are entitled to regain possession of your property and typically keep the payments made thus far; however, the buyer is not obligated to complete or owe you the remainder of the sale amount.
  • Financial due diligence is your responsibility . Without a bank or lender, you, as the seller, operate as that party. Therefore, you must vet your buyer and ensure that they are financially capable of entering the contract.
  • Maintenance is out of your control . Property maintenance is the buyer’s responsibility once both parties sign the contract. What happens if the buyer defaults on the loan and is evicted but does not maintain the property well? The responsibility then shifts to the seller.

What Questions Should You Ask Before Entering a Land Installment Contract?

Once you execute a land contract, you become legally bound to the terms and conditions. Therefore, you must understand exactly what you’re getting into with your land contract agreement. Below are some questions you should ask the seller before considering a land contract in Ohio.

  • Who legally owns the property for sale?
  • What is the condition of the land and property?
  • Are there any outstanding claims against the property?
  • Is there another land contract already on the property?
  • What is the required minimum down payment?
  • Is there a grace period for the land installment contract payments?
  • Which party is responsible for drafting the land contract?
  • Is the buyer or seller responsible for maintaining the land and property? (Usually, land contracts stipulate that the buyer is responsible for all maintenance.)
  • Who pays property taxes on a land contract? (The land buyer typically pays property taxes via the property owner, but confirming this in the land contract agreement is essential.)
  • When will the property owner record the land contract? (In Ohio, land contracts must be filed within 20 days of the execution of the land contract agreement.)

Ensure complete answers to all questions listed above (and many more) with proper legal representation. Additionally, a thorough inspection, land appraisal (as well as an appraisal of the property, if applicable), and financial and credit history review should be performed on both sides.

What Are the Requirements of a Land Contract In Ohio, Specifically?

According to Nolo.com, land contracts in Ohio and across the United States pertain to “real estate such as vacant land, a house, an apartment building, a commercial building, and other real property.” That said, when executed in Ohio, land contracts cannot be entered into over vacant land. For the contract to be valid, a permanent building must exist on the land. If you’re looking to buy land for sale, Ohio offers many beautiful options. However, if you’re considering buying land with a land contract, look for Ohio land for sale with a structure.

So, how does a land contract work in Ohio ?

Requirements can vary from state to state, but when executed in Ohio, land contracts must include specific details, such as the following:

  • Personal information. Full names and current mailing addresses of all parties directly involved
  • Specific dates. The execution date of the land contract in Ohio by both parties as well as specific payment dates and deadlines
  • Full description of the property. A legal description of the property to be sold, including its location
  • Total sale price
  • Date and amount of the down payment
  • Principal balance owed (total sale price plus any fees for services, minus the down payment)
  • Amount of each future installment payment and the due date for each payment
  • Interest rate. The rate agreed upon, which will be charged on the unpaid balance
  • Frequency of statements. A predetermined frequency (either biannual or annual) of statements showing the amount credited to the principal and interest, as well as the balance due
  • Disclosure of encumbrances. A statement of any encumbrances against the property, such as liens, mortgages, etc.
  • Promise of the deed transfer. The seller must sign and agree to transfer the property’s general warranty deed once the buyer has completed their payments
  • Any additional charges or fees. For services that are included in the land contract but separate from the contract price

For additional information, the Land Contract Ohio Revised Code – Chapter 5313 provides requirements and other pertinent information on land installment contracts regarding real property in Ohio. You may also use their search feature to examine specific matters regarding Ohio land contracts.

Recording a Commercial Land Contract In Ohio: Who Does It, and How?

Does a land contract have to be recorded in Ohio? Yes. Upon execution, the commercial land contract in Ohio must be recorded with the county recorder’s office within the jurisdiction of the real estate (per Ohio Rev Code § 5301.01). In Franklin County, Ohio (where The Robert Weiler Company is based), you can find the Ohio County Recorder’s office in Columbus on 373 S. High Street, 18th floor. Search OhioRecorders.com for an office near you. Be aware that, within 20 days of signing the agreement, you must file a record of the land contract in the office where the property is located. If the seller does not file the land contract in Ohio County Recorder’s office within 20 days, the seller must do so for their protection.

As described above, when entering a land contract, Ohio has specific requirements you must meet. Make sure you research these requirements and the property you are considering. Anytime you are about to enter a binding agreement, you should consult an attorney for legal advice. Contact the Ohio State Bar Association to find an attorney in your area. Alternatively, if you cannot afford an attorney, contact Ohio’s legal aid program at 1-866-Law-Ohio. Their programs cover all 88 counties in the state. And their team can assist you with executing your commercial land contract in Ohio.

How to Cancel a Land Contract in Ohio?

A seller and buyer’s options to cancel a land contract depend on many factors. The location of the property is important as laws vary between states. The amount of time a buyer has made payments and how much of the balance remains are also significant.

How to get out of a land contract in Ohio as a seller:

If the buyer defaults on a land contract in Ohio, the seller can cancel the contract. However, the seller cannot seek forfeiture until at least 30 days after the default took place. (Per Ohio Revised Code Chapter 5313.05.) During those initial 30 days, the buyer may remedy the default and reinstate the land contract by remitting all payments owed, including late fees. If the buyer does not remedy their default within 30 days, the seller may cancel the land contract.

The seller must notify the buyer, requesting that they fulfill their part of the land contract within a specific timeframe, including remitting all outstanding payments. If the buyer does not fulfill their obligations, the seller may file a land contract forfeiture claim in court. Depending on the outcome of the court case, the seller may be able to keep all payments already received and retain rights to the property; thus, beginning eviction proceedings.

Note: If the buyer paid for under five years, totaling under 20% of the purchase price, the seller may cancel the land contract in Ohio and evict the buyer. The seller must file a “forcible entry and detainer” claim to regain possession of the property. (Per Ohio Revised Code Chapter 1923.)

How to get out of a land contract in Ohio as a buyer:

The buyer may try to cancel the land contract by taking the seller to court to recover remitted payments. The outcome depends on how long the buyer made consistent payments and how much of the balance remains. However, if the buyer successfully recovers payments, they will likely be ordered to backpay an appropriate amount of rent for the time they resided on the property. Although, in this instance, a solid land contract agreement will often result in the judge ruling in the seller’s favor.

(Please keep in mind that we are a commercial real estate agency, not a law firm. We urge you to speak with your attorney if you need to cancel a land contract in Ohio. An attorney can review your case and provide the best course of action for your specific needs.)

How Can The Robert Weiler Company Assist with Your Commercial Real Estate Contract?

The world of commercial real estate can be complex; let The Robert Weiler Company team untangle the layers for you! Interested in purchasing commercial real estate and want to pursue a less traditional route? A commercial land contract in Ohio may be ideal for you. Our licensed commercial brokers can also help you find buyers for your land sale contract. And our commercial land appraisers can provide you with an appraisal for land.

Our skilled commercial brokerage team has been personally connected to the greater Columbus, Ohio community for 85 years. We deeply understand the market and have meticulous and up-to-date industry knowledge. As such, we have the expertise to elaborate on the two most asked questions: “How do land contracts work in Ohio?” and “What is a land contract in Ohio?” Speak with one of our CRE brokers today at 614-221-4286.

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  1. Land Contract FAQs

    An agreement between a buyer (vendee) and. seller (vendor) that states that a buyer is. purchasing property, but will not receive the legal. title until the debt is paid. The land contract must. be in writing to be enforced, and either the land. contract or memorandum of land contract must be. recorded to be insured.

  2. PDF State Bar of Wisconsin Form 15-2003 ASSIGNMENT OF LAND CONTRACT

    This assignment of the Vendor's interest in the Land Contract is for collateral purposes. Assignor shall be allowed to continue to receive the scheduled, periodic payments(s) on the Land Contract. Any extra or balloon payments shall be made payable to Assignor and Assignee. In the event of a default by Assignor on the obligations secured by ...

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    This amount varies and is negotiable between the vendor and the vendee. Interest Rate: The contract will specify an interest rate, which may be fixed or variable, for the vendee's payments toward the purchase price of the property. ... Transfer and Assignment of Land Contracts. Land contracts, also known as installment sale contracts, land ...

  4. PDF Land Contracts

    MLTA Summit 2022. Presented By: Douglas G. Smith Vice President, Senior Underwriter Stewart Title Guaranty Company. It is an executory agreement between two parties, a seller/vendor and a buyer/ vendee by which the buyer gets a possessory interest and an equitable interest in the property in exchange for installment payments to the vendor.

  5. Twelve Things You Forgot About Using Land Contracts

    Wis. Admin. Code § REEB 16.03 (1) (a) allows brokers to use forms prepared and approved by the State Bar of Wisconsin for deeds, mortgages, mortgage notes, land contracts, release of mortgage, satisfaction of mortgage, assignment of mortgage and assignment of land contract.

  6. Land Contracts in Wisconsin: What are they?

    A land contract is a form of seller financing. It is a written agreement by which a seller, or "vendor," promises to convey to the purchaser, or "vendee," real estate upon the completion of certain obligations, typically on an making payments under an installment payment plan. It allows the parties to negotiate a sale when conventional ...

  7. PDF Land Contracts

    (3) A land contract mortgage need not specifically identify the interest encumbered as a vendor's or vendee's interest. (4) A land contract mortgage that is recorded in the manner provided for real estate mortgages is perfected for all purposes, without filing, under the uniform commercial code, 1962 PA 172, MCL 440.1101 to

  8. PDF Land Contracts-wisconsin Form

    consin particularly recognizes the analogy between a land contract and a mortgage, in that the vendor, like the mortgagee, holds a secu-rity interest in the land.2 Courts have deemed it just to give the purchaser a period in which to redeem, and much of the confusion in the law of land contracts has resulted from the clashing of this equi-

  9. General Principles of Assignments in Real Estate Transactions

    A real estate contract will often contain provisions that limit or prohibit an assignment of a party's interest in the contract. If the contract is silent as to the rights to the parties to assign their interests in the contract, then the rights of the parties, with few exceptions, can be assigned. Normally, assignments of contracts relating ...

  10. PDF Land Contracts and Oil Gas Rights.pptx [Read-Only]

    Land Contract Vendee acquires all of the interest of the Land Contract Vendor in the oil, gas and mineral rights. Reservation of oil, gas and mineral rights in the Land Contract, but no reservation in the resulting Deed. The two potential claims that the Land Contract Vendor could make for a recently executed Deed may not be available after a ...

  11. Land Contracts: What They Are And How They Work

    A land contract is a written legal contract, or agreement, used to purchase real estate, such as vacant land, a house, an apartment building, a commercial building or other real property. As a type of specialty home financing, a land contract is similar to a mortgage. However, rather than borrowing money from a lender or bank to buy real estate ...


    contract, the assignee and all succeeding assignees, including the holder of a land contract vendor's interest who has become the absolute holder of that interest as a result of security enforcement procedures after an assignment of the vendor's interest as collateral security, and the grantee, and all succeeding grantees

  13. Assignment of Purchaser'S Interest in Land Contract

    Related to ASSIGNMENT OF PURCHASER'S INTEREST IN LAND CONTRACT. Deed; Xxxx of Sale; Assignment To the extent required and permitted by applicable law, this Agreement shall also constitute a "deed," "xxxx of sale" or "assignment" of the assets and interests referenced herein.. Assignment of Contracts On the Initial Borrowing Date, the Borrower shall have duly authorized, executed ...

  14. Property Transfer Agreement: Definition & Sample

    A property transfer agreement, also known as a bill of sale, is a legal contract that transfers the ownership of real estate. A buyer and seller will agree to terms such as price, date of closing, financing arrangements, inspections, contingencies and deed requirements. The property transfer agreement documents the transfer of ownership of the ...

  15. Understanding an assignment and assumption agreement

    The assignment and assumption agreement. An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting ...

  16. 14.1: Assignment of Contract Rights

    The one who makes the assignment is both an obligee and a transferor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights" ). The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor ...

  17. Assignment provisions in contracts

    When a party to a contract " assigns " the contract to someone else, it means that party, known as the assignor, has transferred its rights under the contract to someone else, known as the assignee, and also has delegated its obligations to the assignee. Under U.S. law, most contract rights are freely assignable, and most contract duties ...

  18. Chapter 5313

    Following expiration of the period of time provided in section 5313.05 of the Revised Code, forfeiture of the interest of a vendee in default under a land installment contract shall be initiated by the vendor or by his successor in interest, by serving or causing to be served on the vendee or his successor in interest, if known to the vendor or his successor in interest, a written notice which:

  19. What Is a Land Contract In Ohio? Full Guide [2023 Update]

    According to Nolo.com, land contracts in Ohio and across the United States pertain to "real estate such as vacant land, a house, an apartment building, a commercial building, and other real property.". That said, when executed in Ohio, land contracts cannot be entered into over vacant land.

  20. Acquiring Property Rights from Uncompleted Sales of Land

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  21. PDF Caveats Information Sheet

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  22. Section 5301.331

    A land contract that is recorded in the office of the county recorder may also be cancelled, partially released, or assigned by deed or by other separate instrument, acknowledged as provided in section 5301.01 of the Revised Code. Unless in the form of a deed, a separate instrument of cancellation, partial release, or assignment shall be ...

  23. The Procedure for Contract of Sale of Land in Nigeria

    Generally, there are five stages in the sale of land they include, pre-contract stage, contract stage, post-contract stage, completion stage and post-completion (perfection of a title). We will briefly discuss these stages. 1. Pre-Contract Stage. This stage involves the purchaser making inquiries about the property he intends to purchase ...