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Contract for Deed

In a contract for deed agreement, also called land contracts, the buyer is financed by the property seller, where the latter keeps the legal title till the buyer pays all dues. However, an equitable title allows the buyer to live in/on the property and make modifications to the property, rent the property, etc. Below, Experts answer questions on laws related to Contract for Deed agreements.

If the buyer of my property is five months behind payments, can I revoke the contract for deed signed in Texas?

Unless a clause in the contract allows for cancellation, you may not be able to revoke a contract for deed. Such a clause may be based on financing or an inspection contingency. Cancellation of the agreement is, of course, subject to mutual consent where both parties agree to annul the contract.

If the missed amount during the last months is less than $10,000, you may file a suit in the Small Claims Court. However, if the contract has a clause allowing you to lien the property, you may go ahead and file a suit to foreclose with the District Court. If the contract allows, you may also claim fees paid to the attorney for the foreclosure process. Go to http://www.martindale.com/ for more information on contract for deed agreements.

We signed a Contract for Deed agreement, where the interest on the principal amount was decided as 4%. We have been paying for this for the past five years. However, now the seller says that the interest amount should be revised as it was a mistake. Is this legal?

The terms of contract will dictate the interest rate you will have to pay and will be legally binding on the seller. The seller may not unilaterally change the terms of the contract under any circumstances. Similarly, you too will not be able to fix the interest rate or the terms of purchase without the consent of the seller. If the seller does not comply with the agreement and transfer the title as per the contract, you may sue for specific performance.

In Minnesota, how soon can you evict the buyer for non-payment of dues on commercial property under a Contract for Deed?

Unless the contract specifies remedies or notice in the event of payment defaults, you may immediately begin the process of eviction for breach of contract. Under Minnesota law, the seller may serve a notice of termination to the purchaser setting forth the conditions under which the buyer defaulted and the period of time available to repay the dues. This also provides the purchaser with the option to suspend termination of the contract.

Under Minnesota Rules of Civil Procedure, the purchaser must be served summons where three weeks published notice has the same effect as personal service of notice. However, the former case the cure period is extended to 90 days. Other parties such as judgment creditors, lien claimants and mortgagees may also be served.

The buyer has an absolute right to reinstate the contract within the stipulated 60-day period. This is subject to payment of all dues where failing to comply will result in the termination of the contract. This will also mean that the purchaser will lose all payments made so far and any right to possess or assert claims on the property. Post this, the purchaser may be evicted.

My contract for deed reads "$652.66 a month beginning on the 1st day of November 2008 and on the 1st day of each month thereafter until said balance and interest is paid in full, or until the 1st day of April 2010 at which time the entire remaining balance plus accrued interest shall become due and payable". The seller who wrote the contract wants to now refinance at a higher monthly payment. What are our rights?

You understanding of the contract is valid. In the event of any discrepancy in the contract between two parties — where portions may be ambiguous or may be interpreted in many ways — the court will favor the party that did not write the contract. This means, that the contract will be interpreted to favor you in keeping the amount the same till the balance is paid off.

There may be several shortfalls in the terms of a Contract for Deed. For the purchaser, unlike conventional financing terms for property, the process for foreclosure of property under the Contract for Deed may be shorter. Sellers may find it disadvantageous that they may not claim tax benefits or even depreciation on the property. Thus, it is best to seek legal opinion to ensure that your interests are secure whether you are a buyer or a seller.
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