Remedies Under a Land Installment Contract
Real Estate Contract
One of the risks a vendor or seller faces after entering into a land installment contract is the possibility of a vendee or buyer failing to make the required installment payments. This will result in a seller losing money while a buyer has possession of, or is occupying, the seller’s property. If the seller cannot resolve this issue with the buyer to either bring the buyer current on missed payments or terminate the land installment contract, then the seller may need to sue or resort to other legal action to reclaim or recover the property. It is extremely important that a seller retain a real estate attorney when faced with this situation to ensure the proper legal action is taken against the defaulting buyer.
The method a seller may use to reclaim its property from a nonpaying buyer is dependent upon certain facts and circumstances of the transaction. The amount that a buyer has paid under the land installment contract and/or the length of time that the land installment contract has been in effect will determine which remedy the seller may use. The seller’s remedy will either be an eviction lawsuit or a foreclosure lawsuit.
If the defaulting buyer has paid less than 20% of the purchase price and the land installment contract has been in effect for less than 5 years, then a seller may bring an eviction action against a defaulting buyer. Under Ohio Revised Code Section 5313.08, it states as follows:
If the contract has been in effect for less than five years, … if the vendee is still in default of any payment the vendor may bring an action for forfeiture of the vendee’s rights in the land installment contract and for restitution of his property under Chapter 1923 of the Revised Code.
An action for forfeiture under Chapter 1923 of the Ohio Revised Code is an eviction. An eviction lawsuit can be a quicker and less expensive lawsuit for a seller to bring against a defaulting buyer than a foreclosure.
If the defaulting buyer has paid more than 20% of the purchase price or the land installment contract has been in effect for more than 5 years, then a seller must bring a foreclosure action against the defaulting buyer. Under Ohio Revised Code 5313.07, it states as follows:
If the vendee of a land installment contract has paid in accordance with the terms of the contract for a period of five years or more from the date of the first payment OR has paid toward the purchase price a total sum equal to or in excess of twenty per cent thereof, the vendor may recover possession of his property only by use of a proceeding for foreclosure and judicial sale of the foreclosed property as provided in section 2323.07 of the Revised Code…
A proceeding for foreclosure as provided in Chapter 2323.07 of the Ohio Revised Code is more expensive and time-consuming to bring than a proceeding for eviction. Regardless of whether a seller must bring an eviction lawsuit or a foreclosure lawsuit against a defaulting buyer, it is imperative that such seller hire a real estate attorney who understands the nuances of representing buyers and sellers in matters involving land installment contracts.