Land Sale Installment Contracts

by Lidia G. Rincón, Esq.

As part of Nevada Legal Services’ Senior Law Project, I get to travel throughout Northern Nevada to provide legal services to Nevadans 60 years of age or older.  It is through these travels that I have learned about the ever popular land sale installment contracts. 

Nevada Revised Statutes (“NRS”) 375.010, defines land sale installment contracts as “any agreement between a seller and a buyer of real property . . . pursuant to which the buyer gives and the seller receives the consideration paid in multiple payments during a specified period and the seller retains title to the real property . . . until the full contract price is paid, at which time title to the real property is transferred by an instrument in writing from the seller to the buyer.  The term does not include a deed of trust or common-law mortgage instrument that encumbers real property or an option to purchase real property.”  (emphasis added).

In simpler terms, a land sale installment contract is neither a traditional mortgage transaction nor a rent-to-own agreement.  Furthermore, while the buyer is allowed to take possession of the property that is subject to the installment contract, the buyer obtains no legal ownership rights until the terms of the agreement are satisfied.  

Although transactions involving the sale of land by way of an installment contract can help individuals who cannot otherwise qualify for a traditional mortgage loan buy property, buyers in these types of transactions have less statutory protection compared to buyers with a mortgage instrument.  Because a land sale installment contract is a contract by another name, a seller can potentially sue the buyer for breach of contract under common law if a buyer fails to make an agreed upon payment.  Furthermore, because land installment contracts are not governed by statute, statutory mechanisms such as mediation prior to the start of non-judicial foreclosure process are not available to buyers who default on the agreement.   Thus, because a seller is not obligated to negotiate with a buyer in default, it is much easier for sellers to repossess property and sell it again.

While there is no specific title under Nevada Law governing land sale installment contracts, in 2009, the state legislature amended NRS § 598.0923 to impose certain requirements on sellers involved in these types of transactions, or otherwise run the risk of being found a person engaged in a deceptive trade practice. One of the requirements under NRS 598.0923 is for the seller to record the land sale installment contract within 30 days after accepting the first payment from buyer.   Although this requirement does not protect a buyer in a default situation, it protects the buyer in the event the seller tries to pull a fast one and sell the land to multiple buyers at the same time, which according to the folk I have talked to, happens more often than not in the rural communities.  (See NRS 598.0923(1)(f)(1-5) for the other requirements imposed on a seller.)

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