Forfeiture - Foreclosure of Land Contracts

Sam

Forfeiture is a kind of foreclosure carried out in case of land contracts mostly. A land contract is a real estate contract in which the buyer agrees to pay the balance of the purchase price to the seller and in return the latter offers him a deed when the contract is paid in full. The seller retains title to the property till the contract is fully repaid.

There are various reasons behind initiating forfeiture. The seller often starts this legal process when the buyer does not fulfill the obligations of the contract or if the latter stops making payments of the land contracts. For instance, the buyer may fail to keep in good repair condition. Forfeiture may also be initiated if the buyer intends to sell off the property to a third party without an approval from the lender.

Prior to the action of the forfeiture, the seller sends a 30 day written notice to the buyer. This notice must meet the following requirements.

The notice must be in writing.
It should state the details of the contract and describe the features of the property.
The notice must state the terms which the buyer could not fulfill.
The notice affirms that the buyer has to meet his obligations or else the contract will be forfeited.
The legal notice should state the amount of attorney fees claimed by the seller.

The 30 day notice gives the buyer the opportunity to clear his payments and satisfy the obligations within this time period. If the buyer fails to cure his default within this time limit, the seller regains ownership of the property and keeps all the buyer's payments. If the buyer defaults again, the seller will have to issue a second notice called the Declaration of forfeiture. This notice gives him another 30 days to cure the default.

In forfeiture, the seller files an affidavit with the county recorder in order to reflect the change in ownership. Upon successful completion of the legal procedure, the buyer becomes a tenant at will and he may have to leave the property within a few days as stated in the contract. Usually the seller starts off the eviction action by issuing a 3 day notice to the buyer to quit the property.

If a buyer thinks that the seller has incorrectly forfeited the land contract, he can file in response to the eviction petition which deals with the issue of ownership of the property. If the buyer can prove that there is no default in the land contract, then he can stop the forfeiture and regain his ownership rights over the property.

In most cases, where the forfeiture is due to non-payment of monthly installments, the buyer can escape the legal action by paying a substantial amount of the purchase price to the seller. But this is not always guaranteed.

Guest

we purchased a mobile home 2 years ago by land contract. we can no longer afford to make the payments (we are not living in the property) we now live in indiana, the property is in california. we have tried to sell the property to no avail. how can we turn over the property back to the seller. we know we will lost all the money we have put in.

smithsussane · Posted: Sat Oct 11, 2008 12:05 am Post subject:

Hi Marcia!

Welcome to Forums!

You can speak to the lender and tell him that you cannot afford the property anymore and want to go for either a short sale or a Deed in lieu foreclosure. If the lender agrees to this, he will tell you how you need to proceed. You will have to give back the property to the lender then. But the lender's approval is required.

Feel free to ask if you have further queries.

Sussane

Guest

We sold a house on land contract in INdiana. He was supposed to pay an extra $230 per month the first year for the down payment (he paid $690), he was to pay $100 per month for the escrow for taxes (it has been 18 montsh, he has paid $200 total), he is 3 months behind on the monthly payments and went without homeowners insurance for 3 months (the mortgage company tacked that extra onto our monthly payment). He hasn't paid property taxes for this spring's installment. We gave him a "Breach of Contract" form on 7/1/09 giving him until 7/10/09 to pay us the $3600+ that he owes or we will take steps to get the house back. What are our options at this point if he doesn't pay = which I doubt he will. We live in Indiana. The contact says if he defaults on any point we can move to take the house back.

Guest

I have a rent-to-own (I assume this is the same) and my client quit paying 20 months into a 36 month contract. (this is all in WV) I have filed for eviction. I have been told by friends that I will have to pay back the money the buyer has paid me. Can this be possible?

drcharbonneau · Joined: 13 Nov 2009 Posts: 4 2.40 Dollars($)

I have two land contracts for pieces of property that were and, to a much lesser degree, still are in dire need of repairs. I actually wrote the contracts making certain I followed all the essentials required per the "Burns Indiana Statutes" on land contracts. I included, in one, penalties for recission by the seller to the effect that if I am not in default on my payments and he chooses to recind the contract, he must pay me back the money I payed plus most of the interest as well as every bit of any time and materials I have invested into repairs or improvements.
Recently he tried to extort the 2008 taxes out of me when the contract clearly states he pays all taxes prior to the signing. I signed 12 days prior to the end of 2008 and recorded the contract with the county February 6th, 2009. I actually have a case against him with the police and it has gone on to the prosecutor concerning the attempted extortion of the taxes. He threatened to evict me if I didn't pay the 2008 taxes. The police said he can't do that and other things.
The question I have, since it really doesn't appear that either of us has actually breached the contract, do I have any recourse against him for his attempted extortion? I mean the guy runs heavy equipment, i.e. a front end loader, drinks and has threatened to tear the house down. I am considering a protective order and our contract specifically states and even defines the meaning, in that both of us shall respect each others right to quiet enjoyment.

Alsi2o:
From what I've read, if you rescind the contract, you may have to pay hium back, depending on the terms. Terms have a lot to do with it all.
Rent to Buy is not the same as a land contract unless it includes one. I never would enter a rent to buy. It is either a contract that has been tailored to be fair to everyone or it just doesn't happen. I tailor my contracts depending on the property and how much work I'll have to do to bring it to habitable condition.
I suggest you go to your public library and look up the Burns Statutes for your state. They often have precedent statutes of what has occurred in various other cases. Here in Indiana, a land contract cannot become a rental situation unless it is deemed completely void. Think of this, though: If something is totally void, it also voids the dollar amount, so you might have difficulty getting any damages based on "back rent" if it does become void. It might become a "tenancy of tolerance" where the occupant actually pays nothing, or the occupant may say the house was not rentable or, if he made repairs, might be able to recover against you for any repairs he made to make it rentable, even if they were incomplete.

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