How to Do a Land Contract in Indiana
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In recent years, there have been several cases concerning the structure of land contracts and how to deal with the resulting default. In particular, which method of repossession (i.e., execution or forfeiture) is an acceptable remedy. In Rainbow Reality Group, Inc., and/or Cress Trust v. Katrine Carter and Quentin Lintner, 112 N.E.3d 716 (Ind. Ct. App. In 2018), the Indiana Court of Appeals recently ruled that an agreement classified as a “lease to purchase” agreement was not technically a lease and that, as a result, the buyers had not obtained protection under the laws of the Indiana Residential Landlord-Tenant. In Rainbow, the buyers, Carter and Lintner, entered into a hire-purchase agreement with the seller, the Rainbow Reality Group. Id. at p. 718.
When buyers took possession of the home in May 2013, the house had been empty for nearly three years and was in very poor condition. See Id. Under the terms of the contract, Carter and Lintner would pay $549 a month for 30 years. Id. at p. 719. Under the contract, the first 24 payments made by Carter and Lintner would be considered rent. Id.
at p. 720. If the couple made at least 24 rent payments, the parties would enter into a separate “conditional purchase agreement ( of land)” for the remaining 28 years. Carter and Lintner later argued that this deal was void because Rainbow had tried to have it “both ways,” because Rainbow treated Carter and Lintner not only as owners by making them responsible for maintaining the property, but also as tenants if they didn`t make payments in the first two years. they would be deported. Id. at 721. Impossible to have both. The format of a lease-to-purchase agreement, i.e. a land contract, is often ambiguous and places the owner in a hybrid role of owner and seller.
Apparently, Rainbow`s development company drafted an agreement that was a combination of a lease and a land contract. She wanted the document to be classified as a land contract so that she would not have the responsibility of a landowner. At the same time, the developer wanted to benefit from a lease in the early years so that he could easily chase the buyer away if he did not pay. Parties who enter into such agreements should pay attention to how their contract is characterized. The format and content of the agreement should be consistent in order to avoid confusion as to the rights and obligations of the parties. Not often the law will allow you to have your cake and eat it. Read all documents. In footnote 2 at p. 2. 5-6 of the opinion of the Court of Justice recognises that the rights of the parties may otherwise be contractually established, regulated or subordinated without the need for a link for the tenant.
Chart President Robert “Bob” Keck told IndyStar that he doesn`t need a real estate license because Chart claims ownership of the homes he buys under contract. He said Chart`s attorneys had thoroughly researched their legal position and that the company also had a statement of support from the Indiana attorney general. Be clear. If, as a seller, you want to be able to retain the property and simply evict a resident after he/she has not made the payment, then you should expect the court to treat the contract as an owner-tenant arrangement. If, on the other hand, you wish to sell the property through payments over time, the form and content of the agreement must clearly indicate that the transaction is intended to transfer ownership, and you must acknowledge that the equitable title and rights associated with it belong to the buyer. Here are the most important elements you should include when creating a land contract: sale or rental? Faced with an alleged measure to enforce land contracts, it is necessary to ask whether the contract is in the form of a sale in relation to a lease. The answer to this question controls the corrective actions after the failure. (By the way, these issues are not only found in real estate law.) In a standard land contract dispute, the owner/seller wants to remove the buyer from the property as soon as possible with as little legal and practical effort as possible.
In other words, the owner will want to evict the buyer, a remedy known in this context as confiscation. On the other hand, the buyer may want to protect their so-called fairness in the property or, in other words, want credit on the property for payments made. This means that the buyer may want the rights holder to receive mortgage enforcement measures (deadline, right of return, sheriff`s sale process, etc.). Confiscation. The Hooker court concluded that confiscation is “the sale of property without compensation.” In other words, “expiration terminates an existing contract without refund, while termination of such a contract terminates it with a refund and returns the parties to their original status.” Indiana disapproves of decadence “because significant injustice can result.” You see, the Vendée land contract fails the case of foreclosure of the mortgage creditor. Land contracts have been used for decades by individuals who sell their homes or land. But lately, Nelson said, they`re being used more often by companies that sell homes in wide variations of lease agreements with option to buy. For example, an IndyStar investigation found that one of these sellers, Chart Properties LLC, entered into more than 100 contracts to buy and sell homes in a process that is not covered by Indiana`s real estate licensing law.
An Indiana Land Agreement sets out all the conditions for the purchase and sale of vacant land between two parties. It contains everything from the agreed purchase price to the legal description of the property as written on the deed. As a rule, the buyer compiles the contract, which he submits to the seller as the first offer in the subject of the negotiation. The seller may accept, reject or reject the proposal. Once both parties have reached an agreement, the contract must be signed and executed in order to legally transfer the land. Searching for contract templates online is another viable option, but the default templates are usually outdated and don`t allow you to customize the document. Purchase without credit. A land contract is another, albeit less conventional, form of real estate financing. The transaction usually requires the buyer to make payments to the seller (the owner) over time. In many cases, the contract requires a down payment and/or a large balloon. Only after the buyer has paid the contract price in full, the buyer receives a deed and becomes the owner.
In the meantime, although the buyer may own and occupy the property, legal title remains with the seller, although what is called fair title is transferred with the buyer. See Skendzel v. Marshall, 261 Ind. 226, 234, 301 N.E.2d 641, 646 (1973) (“Title shall not be transferred to the seller [buyer] until the terms of the contract have been fulfilled, but the demand for equity will pass to the Vendée [buyer] at the time of conclusion of the contract.”) One could say that the seller is a hybrid between an owner and a bank. Usually, but not always, these transactions apply to situations where the buyer cannot or does not want to get a traditional loan, or to informal affairs between family and friends. If a tenant`s rental interest in a property survives the expiration of a land contract if the tenant was not a party to the action for forfeiture and the seller actually knew that the tenant was in possession of the property. Superior mortgage. The Lunsford Court quickly waived the buyer`s priority claim of the land contract. Since the lender reserved his mortgage six months before the buyer registered the land contract, the mortgage prevailed. Since the lender made the buyer a party to the enforcement action, thereby giving the buyer the opportunity to assert its subordinated interest in the asset, the enforcement order of the court of first instance was conclusive for the buyer. The court upheld the summary judgment of the court of first instance in favour of the lender accordingly. Morale: Don`t forget to record.
My two cents. Finally, in case you are wondering, I personally would never recommend signing a land contract, either as a seller or as a buyer. There are too many risks and uncertainties. In the case of leases or loans, everyone – including the courts – knows where the parties stand. While traditional financing is not an option, seller financing in the form of a standard bond and mortgage is, in my opinion, better than a land contract. Unlike a hire purchase, a contract on the deed allows you to buy the property in several times. After a first deposit, you pay monthly payments for the duration of the contract. Once the period has expired, you will have to pay the balance immediately. This is called a lump sum payment, which is usually done through a loan. Given the outcome of the above, the Indiana House of Representatives recently addressed the issue in House Bill 1495. House Bill 1495 was a bill passed by Indiana House, 82-14, to protect families from predatory “primary housing contracts.” House Bill 1495 contained provisions requiring sellers to inform buyers at the beginning of the contract of the value of the property they were buying and the amount they would ultimately pay if they complied with the terms of the agreement.
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