Extinguishing a Land Installment Contract where the buyer is in default

We recently completed a litigation project for a commercial client to extinguish a Land Installment Contract where the buyer was in default and the owner wanted to lease or sell the property to another party by judicially extinguishing the buyer’s rights under the Land Installment Contract.

As a starting point, this article explains, in seller financing situations involving real property, there are several options available to structure and document the transaction.  As we explain, a Land Installment Contract is more difficult to extinguish than a lease with option to purchase, but less involved than a foreclosure action under a note secured by a mortgage against the property to be sold.

Thus, in the specified assignment, we proceeded with an action for “forfeiture” in Common Pleas Court before Hamilton County Judge Beth Myers.

Ohio’s Land Installment Contract statute requires that a foreclosure action be pursued in situations where the buyer has made payments under contract for more than five years or paid more than 20% of the principal portion of the purchase price.  O.R.C. Section 5313.07.  (In such case, the buyer is then entitled to any excess of the sale price from foreclosure sale over the remaining balance of the purchase price under the Land Installment Contract.)  However, Ohio Courts have found that this protection extends only to residential purchasers, and does not protect buyers in commercial real estate transactions.  See, e.g., P.M.D. Land Co. v. Warner Realty, 2009-Ohio-6704 (11th Dist., 2009).

Therefore, simple judicial action for “forfeiture” of the rights of the buyer is called for in a commercial setting.  It is not a truncated, expedited proceeding such as an eviction, but it is far less involved than a foreclosure action would be, and vests fewer rights in the buyer.

As it turns out, in our case the buyer defaulted and we then were able to quiet title in the name of our client, the property owner, the Land Installment Contract was judicially extinguished, and the title was thus quieted in favor of our client, freeing him to lease or sell the property to another tenant or buyer.




Attorney | ‭513-943-6655 | [email protected] | + posts