Under a land contract, also called a contract for deed, installment sale contract or agreement for sale, the seller agrees to convey title to the buyer upon full payment of the purchase price. The buyer acquires an equitable interest in the property when the buyer and seller sign the land contract. Land contracts provide a type of seller financing for a real estate purchase. Arizona Revised Statutes Sections 33-741 through 33-750 recognize the validity, and govern the terms, of land contracts.
A seller who receives all payments owed under a land contract must deliver a deed transferring legal title to the buyer. The deed must state that it is being delivered to complete a contract, reference the recording information for the land contract and be labeled “payoff deed.” When a buyer defaults, the seller can utilize forfeiture or foreclosure remedies to seize the property from the buyer.
If the buyer fails to make payments when due under the agreement, the seller can forfeit the buyer’s interest in the property. The seller begins the forfeiture process by recording and serving a notice on the buyer. Arizona Revised Statutes Section 33-743 specifies the form a notice of election to forfeit should follow. Forfeiture can be completed by notice or judicial process.
After a seller serves a notice of forfeiture, the buyer can reinstate by paying all amounts due by the end of the applicable grace period. Grace periods allowed to the buyer before forfeiture depend on the portion of the purchase price previously paid when the default occurs. A buyer will have at least 30 days to make the late payment (if less than 20 percent of the purchase price has been paid) and in some cases up to nine months if the buyer paid 50 percent or more of the purchase price.
Some land contracts allow the seller to foreclose the contract in the same manner as a mortgage loan instead of using the statutory forfeiture procedures. In order to foreclose, the contract must permit the seller to declare all remaining principal portion of the purchase price due and payable when the buyer fails to make a payment.