Brief Fact Summary. Sebastian entered into a contract that allowed for installment payments on a loan and in the case of default those payments to be forfeited. Sebastian subsequently defaulted, and the sellers wanted to enforce the contract.
Synopsis of Rule of Law. An installment land sales contract will be treated like a mortgage in that a seller retains legal title and the buyer retains equitable title with the right to redeem the property with payment in the case of default.
Held. No. For a typical installment land contract once the contract is entered into legal title stays with the seller and equitable title passes to the buyer. The two share the title until the buyer has paid the contract price or some portion thereof. At that time the seller must deed his or her rights to the buyer. Then the buyer owns both legal and equitable title. The legal title stays with the seller to protect his or her rights in the property until payment is made. An installment land contract works exactly like a mortgage would. In both loans the seller is financing the purchase, with the house used as collateral. Just like with a mortgage, if the buyer defaults on the property he or she has the right to redeem the property with payment. In order for the seller to cut off the right to redeem the mortgagee is required to ask the court permission to sell the property at public auction. This court holds that holding the installment contract to be a mere lien against the property is a just result to protect both parties’ rights.
Discussion. When purchasing property the court will uphold and protect the buyer’s equitable rights in the property. The seller is owed the payment, plus interest, and all cost that occur but legal title does not give the seller the right to cut off the buyer’s right to redeem without court approval.