Property may be sold and acquired in a variety of different ways especially based on the type of property it is. One of these forms is a land sale contract. A land sale contract is different from a deed or other traditional instrument of title. Under a land sale contract, the buyer does not get title or full ownership of the land right away.
What is a land sale contract?
A land sale contract arises between a vendor and a buyer. Depending on the circumstances, a land sale contract may be made orally however this may cause enforceability issues later. (Rogers v. Davis (1994) 28 Cal.App.4th 1215, 1219.) The contract is for the sale of land in return for installment payments being made over a period of time longer than a year. (Cal. Civ. Code § 2985.) This means the title to the land is retained by the vendor until all or most of the purchase price is paid. (Venable v. Harmon (1965) 233 Cal.App.2d 297, 299-300.)
A land sale contract acts as a security device which gives the buyer possession immediately but allows the seller to keep the title until the buyer pays the final installment. (Taggart v. Cal-Linda Packing Co. (1956) 146 Cal.App.2d 545, 548.) As such, the land cannot be transferred to someone else by the purchaser unless they also assign the contract to that new purchaser. (Cal. Civ. Code § 2985.1; Petersen v. Hartell (1985) 40 Cal.3d 102, 116.)
This assignment must be specific as to the rights transferred in the land, not just transferring things like mineral or oil rights. (Klamath Land & Cattle Co. v. Roemer (1970) 12 Cal.App.3d 613,619.) Because of the time allowed for the buyer to pay for the property, the seller in the meantime may encumber the property with a lien but must clear the property by the time title transfers. (Darr v. Clevelin Realty Corp. (1939) 33 Cal.App.2d 500, 504.) Once the buyer has fully paid off the contract, the land is theirs.
What rights do the buyer and seller have under a land sale contract?
As this is a contract, both parties also have the ability to bring a breach of contract claim. The seller is considered to be the trustee of the land while the contract is in place, while the buyer holds equitable ownership of the land. (Roemer v. Pappas (1988) 203 Cal.App.3d 201, 205-206.) A seller is usually still responsible for real estate taxes during the duration of the contract. (Parr-Richmond Indus. Corp. v. Boyd (1954) 43 Cal.2d 157,165-166.)
Once the buyer has paid fully, the seller must turn over the title. If they are unable to, the buyer can collect what they paid to the seller. So, if the land is taken the buyer may be entitled to any award made, the vendor is limited to any outstanding balance owed under the land sale contract. (Alhambra Redevelopment Agency v. Transamerica Financial Services (1989) 212 Cal.App.3d 1370, 1376-1377.)
Because this is a security instrument, a buyer has similar rights under an owner of land who holds title subject to a deed of trust or mortgage. As such, if the buyer of a land sale contract defaults on installment payments they have a right to reasonable opportunity to complete the purchase before the seller can foreclose. (Petersen, 40 Cal.3d at 121.)
What are some examples of a land sale contract?
For example, Julie sells a home to Shawn under a land sale contract. This gives him two years to pay off the home. During that time Shawn may reside in the house. As a result of this land sale contract, Julie holds title to the home essentially as a trustee. Shawn holds equitable title until he pays the full price of the contract.
If the contract was for $500,000, once Shawn had paid all or most of it depending on the terms set Julie would need to transfer title to Shawn. Shawn would then have full ownership of the property.
If Shawn defaulted on his payments to Julie, he would have the right to a reasonable period of time to get current on those payments. If Shawn breached the contract Julie would get to retain title and the payments Shawn had already made. If Julie cannot convey the title once Shawn has fully paid, he has the right to all the money he paid Julie under the contract.
Due to the way ownership rights are in flux in a land sale contract, this may raise issues with selling the property or otherwise determining individuals’ rights in the property. If multiple people have been given rights to property under an installment contract, disputes over who owns what may arise. If the dispute reached a certain level of animosity, parties might seek out a partition action. This would allow the court to determine the parties’ interests in the property. This is important because the court could decide ownership interests and whether the contract had assigned the appropriate rights necessary for ownership.
Alternatively, if a land sale contract had not been fully paid off and a partition action was ongoing, the title not having passed to the buyer may pose an issue in asserting a claim for partition. To have a claim for partition, the person must be an owner of the property. Being a purchaser under a land sale contract may complicate that.
Conclusion
If you are a buyer under a land sale contract or or think you may have ownership interests in a property under such a contract, you may want to seek court determination of these interests. In pursuing a partition action, a court will determine parties’ interests in the property and divide it accordingly. At Underwood Law, our partition attorneys can help you navigate your partition action efficiently and with care. We are here to help.
Property may be sold and acquired in a variety of different ways especially based on the type of property it is. One of these forms is a land sale contract. A land sale contract is different from a deed or other traditional instrument of title. Under a land sale contract, the buyer does not get title or full ownership of the land right away.
What is a land sale contract?
A land sale contract arises between a vendor and a buyer. Depending on the circumstances, a land sale contract may be made orally however this may cause enforceability issues later. (Rogers v. Davis (1994) 28 Cal.App.4th 1215, 1219.) The contract is for the sale of land in return for installment payments being made over a period of time longer than a year. (Cal. Civ. Code § 2985.) This means the title to the land is retained by the vendor until all or most of the purchase price is paid. (Venable v. Harmon (1965) 233 Cal.App.2d 297, 299-300.)
A land sale contract acts as a security device which gives the buyer possession immediately but allows the seller to keep the title until the buyer pays the final installment. (Taggart v. Cal-Linda Packing Co. (1956) 146 Cal.App.2d 545, 548.) As such, the land cannot be transferred to someone else by the purchaser unless they also assign the contract to that new purchaser. (Cal. Civ. Code § 2985.1; Petersen v. Hartell (1985) 40 Cal.3d 102, 116.)
This assignment must be specific as to the rights transferred in the land, not just transferring things like mineral or oil rights. (Klamath Land & Cattle Co. v. Roemer (1970) 12 Cal.App.3d 613,619.) Because of the time allowed for the buyer to pay for the property, the seller in the meantime may encumber the property with a lien but must clear the property by the time title transfers. (Darr v. Clevelin Realty Corp. (1939) 33 Cal.App.2d 500, 504.) Once the buyer has fully paid off the contract, the land is theirs.
What rights do the buyer and seller have under a land sale contract?
As this is a contract, both parties also have the ability to bring a breach of contract claim. The seller is considered to be the trustee of the land while the contract is in place, while the buyer holds equitable ownership of the land. (Roemer v. Pappas (1988) 203 Cal.App.3d 201, 205-206.) A seller is usually still responsible for real estate taxes during the duration of the contract. (Parr-Richmond Indus. Corp. v. Boyd (1954) 43 Cal.2d 157,165-166.)
Once the buyer has paid fully, the seller must turn over the title. If they are unable to, the buyer can collect what they paid to the seller. So, if the land is taken the buyer may be entitled to any award made, the vendor is limited to any outstanding balance owed under the land sale contract. (Alhambra Redevelopment Agency v. Transamerica Financial Services (1989) 212 Cal.App.3d 1370, 1376-1377.)
Because this is a security instrument, a buyer has similar rights under an owner of land who holds title subject to a deed of trust or mortgage. As such, if the buyer of a land sale contract defaults on installment payments they have a right to reasonable opportunity to complete the purchase before the seller can foreclose. (Petersen, 40 Cal.3d at 121.)
What are some examples of a land sale contract?
For example, Julie sells a home to Shawn under a land sale contract. This gives him two years to pay off the home. During that time Shawn may reside in the house. As a result of this land sale contract, Julie holds title to the home essentially as a trustee. Shawn holds equitable title until he pays the full price of the contract.
If the contract was for $500,000, once Shawn had paid all or most of it depending on the terms set Julie would need to transfer title to Shawn. Shawn would then have full ownership of the property.
If Shawn defaulted on his payments to Julie, he would have the right to a reasonable period of time to get current on those payments. If Shawn breached the contract Julie would get to retain title and the payments Shawn had already made. If Julie cannot convey the title once Shawn has fully paid, he has the right to all the money he paid Julie under the contract.
Due to the way ownership rights are in flux in a land sale contract, this may raise issues with selling the property or otherwise determining individuals’ rights in the property. If multiple people have been given rights to property under an installment contract, disputes over who owns what may arise. If the dispute reached a certain level of animosity, parties might seek out a partition action. This would allow the court to determine the parties’ interests in the property. This is important because the court could decide ownership interests and whether the contract had assigned the appropriate rights necessary for ownership.
Alternatively, if a land sale contract had not been fully paid off and a partition action was ongoing, the title not having passed to the buyer may pose an issue in asserting a claim for partition. To have a claim for partition, the person must be an owner of the property. Being a purchaser under a land sale contract may complicate that.
Conclusion
If you are a buyer under a land sale contract or or think you may have ownership interests in a property under such a contract, you may want to seek court determination of these interests. In pursuing a partition action, a court will determine parties’ interests in the property and divide it accordingly. At Underwood Law, our partition attorneys can help you navigate your partition action efficiently and with care. We are here to help.
