Contract for Private Real Estate Sale
A seller and I would like to do a transaction like a Land Contract, but including the rental property on the land. We do not intend to secure the loan by the deed, therefore do not want to create a mortgage. What is the correct form to use?
Re: Contract for Private Real Estate Sale
I do not know why the seller is crazy in not wanting a secured debt, but as long as the loan he gives you is not backed by a piece of land or building, there is no mortgage. If you do not first agree to secure the proprety being sold by a lien on that property, then by definition there is no mortgage. You can just have a sale of property document, tranfer of ownership, quite claim deed, etc. That you have to ask makes me wondered if you really know enough about real estate to be involved in such a purchase. You could lose a very large amount of money by not knowing what you are doing. Be careful and read up on the subject before you commit yourself.
George Shers
Law Offices of Georges H. Shers
4170 Glenwood Terrace, Suite #1
Union City, CA 94587
Re: Contract for Private Real Estate Sale
First, the term “land contract” can be a bit misleading, because people may think it is used only to sell unimproved, raw land. On the contrary, a land contract will ordinarily bring about the sale, not only of the tract of land, but all improvements on the land, including buildings, growing crops, etc., and if the buildings have tenants in them, the sale will be “subject to” the leases as well. A land contract is sometimes called a contract for deed. What happens when two parties enter into a land contract is that the vendor retains title until the vendee completes the payments or otherwise performs the terms of the contract, and at that time the vendor must convey title to the vendee. The vendee is usually placed in possession immediately, and will be the equitable but not the legal owner.
As to a “form” that you might purchase at a stationery store or pick up from a title company, my best guess is that it doesn’t exist. Life in the real world of business is not conducted by filling in the blanks on pre-printed forms. The closest I could come to a “form” for an installment sale of real property is 34 pages of text in the Forms supplement to the Miller & Starr treatise on California real estate. This consists of a half dozen pages of introduction to the legal concepts a lawyer should consider in drafting a land contract, followed by maybe 15 single-spaced pages of proposed clauses, and then finally a half dozen or so pages exlaining the legal consequences of alternatives and variations on the basic text.
In the normal course of things, a client wishing to do a “land contract” would go to a lawyer, the lawyer would consult Miller & Starr (a 30 or 40 volume library of California real-property law wisdom), and then word-process a draft contract using the Miller & Starr model as a starting point, but with variations based on interviewing the client in depty to find out particulars of the proposed transaction. The lawyer might also participate in negotiations to develop and refine the deal terms. The result would be a carefully-customized document that would, among other things, devote a fair amount of text to matters rrelating to the current tenants and the revenues and expenses associated with those leases.
Land contracts are rather uncommon and, I think, disfavored in California, except perhaps for time-share sales and other promotions. They are more common “back East” and maybe in earlier decades. I’m sure you have your reasons for wanting to do your deal with a land contract, a/k/a contract for deed or instalment sales contract, but I doubt you’ll find a “form” any more ready-to-use than the Miller & Starr model text in their hardbound mulyi-volume treatise.
Bryan Whipple
Bryan R. R. Whipple, Attorney at Law
P O Box 318
Tomales, CA 94971-0318