If you need to consult with an attorney on land contracts, please contact the Erie County Bar Association's Lawyer Referral & Information Service.

A land contract is an installment sale agreement for the sale of real estate. Under a land contract, the purchase price for the real estate is paid over time. The buyer may or may not make a down payment, but will usually make monthly payments until the purchase price, plus the interest, are paid in full. The seller retains legal title to the real estate until the purchase price is paid in full. The buyer acquires only equitable title to the real estate during the term of the contract and becomes vested with the legal title upon the satisfaction of all the terms of the land contract.

The relationship between the seller and the buyer must be defined by the written land contract itself. This document should include not only the essential financial terms of the transaction (purchase price, down payment, monthly payment, interest rate, etc.) but also address all of the other costs and responsibilities associated with the ownership of real estate. This includes, for example, who is responsible for the taxes, insurance, maintenance, repair, and utilities. Since both the seller and buyer have an interest in the land, the land contract should also define who bears the risk of loss in the event that the real estate or the structures are damaged.

Once the buyer has satisfied all of the obligations under the land contract, the seller should execute a deed in favor of the buyer and the deed should be recorded with the local recorder of deeds office. At that time, the seller must be able to provide the buyer with a good title to the property. A careful buyer will make sure that there are no outstanding liens or encumbrances affecting the property at the time of deed transfer. Before the settlement date, the buyer’s attorney will search the title to make sure that there are no liens or encumbrances on the title. It is also advisable to have the attorney search the title before the land contract is signed. This assures that the seller is the owner of the property, and has the right to sell it. This also assures that if there are any defects in the title to the property, the buyer can insist that they are fixed before signing the land contract. If the seller does not agree, the buyer can decline to enter into the land contract.

A land contract, just as a traditional agreement for the purchase of real estate, is the most important document you will sign during the entire process of purchasing the real estate. It sets forth the entire agreement between the buyer and the seller, including the terms and conditions of the transaction, and it defines the rights and obligations of both parties during the term of the contract. For these reasons, it is wise to proceed with caution and be aware of the legal importance of such a document and the duties and obligations regarding the property created by this buyer and seller relationship.

Information is current as of 2/2018.