You have a “Contract for Sale and Purchase with Lease Provision”, sometimes common known for “lease to own agreement”. Pursuant to the contract, you pay a down payment, take possession of the property, and the balance is payable in a monthly payments and a balloon payment at the end of the . You also have the obligation to pay real estate taxes after the year of “sale”. You are entitled to a deed upon payment of all installments plus interest.
Unfortunately, after paying installments for a sinificant period of time, you defaulted. At certain point, you tendered to the seller the entire unpaid balance of the purchase price plus interest, and demanded a deed. The seller refused to accept payment or give a deed, and insisted that the buyer, because of his default, had forfeited further rights in the land.
The trial court in H & L LAND COMPANY, Inc. a case with the same fact pattern, agreed with the buyer’s position, and held that “the parties were in essentially the same position as if the seller held a purchase money mortgage to secure the buyer’s performance of the buyer’s contract obligations.”
The appellate court held that the vendor under a specifically enforceable installment land sale contract, who has received part of the purchase price and has given the vendee possession of the land and the benefits and burdens of ownership, is in essentially the same position as a vendor who has conveyed the legal title and taken back a purchase money mortgage, and he cannot unilaterally and summarily extinguish the vendee’s equitable title upon the vendee’s default.
What does this mean? It means a lease to own agreement is considered by the court to be a mortgage agreement between the buyer and the seller. As the result, the buyer is the owner of the property, not a tenant to the seller, and if the buyer defaults, the seller must initiate a foreclosure proceeding, as opposed to an eviction process. If the buyer tenders the full payment, the seller must deliver the deeds. This is called right of mandatory redemption.