Land Contracts
In a land contract the seller keeps legal title and the buyer takes possession, paying over time. That split is what makes it useful, and it is also what makes it go wrong.
Land contracts are common in Michigan, particularly where a buyer cannot obtain conventional financing or where a seller wants an income stream rather than a lump sum. The seller, called the vendor, holds legal title until the contract is paid. The buyer, called the vendee, takes possession immediately and holds what the law treats as equitable title, which is a real ownership interest even though the deed has not transferred.
Because both parties hold something, neither can act unilaterally. A vendor who stops receiving payments cannot simply change the locks. A vendee who has paid for years cannot be treated as a tenant. Michigan provides specific procedures for ending a land contract, and using the wrong one restarts the process at the beginning.
Getting the contract right at the start
Most land contract disputes trace back to a document that was too short. These agreements have to allocate responsibilities that a mortgage and a deed would otherwise handle separately, and they run for years.
- Payment terms, interest, and whether a balloon payment comes due and when
- Who pays property taxes and insurance, and what happens the first time they are not paid
- Whether the vendee may improve, alter, rent out or assign the property
- What counts as default, and how much notice and opportunity to cure is required
- Whether the contract is recorded, which protects the vendee against later claims
- Any existing mortgage on the property, and what happens if the vendor stops paying it
- How and when the deed is delivered once the contract is satisfied
If it is not recorded, the world has no notice of the buyer's interest, and the property can be encumbered or conveyed in ways that create a serious problem later. Recording is inexpensive and it is routinely skipped.
Forfeiture and foreclosure
When a vendee stops performing, Michigan gives the vendor two distinct routes, and they lead to different places.
Forfeiture
Forfeiture is the faster route. It proceeds through summary proceedings in district court after a statutory notice, and it terminates the vendee's interest, returning possession to the vendor. The vendee is given a redemption period in which the default can be cured, and the length of that period depends on how much of the purchase price has already been paid. Forfeiture generally ends the contract rather than producing a money judgment for the balance.
Foreclosure
Foreclosure is judicial, filed in circuit court, and it treats the contract more like a mortgage. It can result in a sale of the property and, in appropriate cases, a judgment for the deficiency. It is slower and more expensive, and it carries its own redemption period. Where substantial equity has accrued, or where the vendor wants more than possession, it can be the correct route.
Choosing between them is a strategic decision that depends on how much has been paid, what the property is worth, whether the vendee has other assets, and how quickly possession is needed. It is not a formality.
How these matters run
- The contract and payment historyThe agreement itself, whether it was recorded, the payment ledger, and the tax and insurance status of the property.
- Default assessedWhat the contract defines as default, what notice it requires, and what has already been sent. Defective notice is the most common reason these restart.
- Route selectedForfeiture or foreclosure, decided on equity, timing, and whether a money judgment is realistically collectible.
- Notice, filing and possessionStatutory notice served correctly, then proceedings filed in the proper court, through redemption and possession.
Questions about land contracts
My land contract buyer stopped paying. Can I just evict them?
No. A land contract vendee is not a tenant and does not have a tenant's status. They hold an equitable interest in the property, and ending it requires either forfeiture or foreclosure with the notice the statute requires. Treating it as an eviction wastes weeks and can expose you to a claim.
I am the buyer and I missed payments. Have I lost everything I paid in?
Not automatically. Michigan gives a redemption period during which the default can be cured, and the length depends on how much of the price has been paid. If you have built up real equity, you have more to protect and more reason to act immediately rather than after the period runs.
The seller has a mortgage on the property. Is that a problem?
It can be a serious one. If the vendor stops paying that mortgage, the lender can foreclose regardless of your payments to the vendor. This is exactly the risk a properly drafted and recorded contract addresses, and it should be examined before signing rather than after a default notice arrives.
Can a land contract be assigned or the property rented out?
Only if the contract permits it. Many prohibit assignment or leasing without written consent, and doing it anyway can itself be a default. Read the document before making arrangements that depend on the answer.
The wrong procedure starts the clock over.
[PHONE]Matters with a closing date, a filing deadline or a hearing already on the calendar are handled by phone.