In Minnesota, the contract for deed is a commonly used instrument that allows for a home seller to finance the buyer's purchase while keeping the deed in her name as security. While contract for deed deals can be lucrative for both parties, they often don't work out because the buyer is unable to satisfy the contract terms. When that occurs, the seller files a Notice of Cancellation of Contract for Deed with the county recorder.
Risk of Forfeiture
In Minnesota, the buyer, also called the vendee, who falls behind on payments or otherwise defaults on the land contract is risking the entirety of his payments to the seller, also called the vendor. If the contract contains a forfeiture clause, the vendor retains the right to reclaim the property after a short period of time if the vendee defaults. The vendor also gets to keep the equitable payments already made, although according to the Minneapolis Federal Reserve, courts have recently begun favoring vendees who have accumulated a significant stake in the property.
Notice of Cancellation
A vendor who wishes to cancel a contract must begin the process by writing the vendee and recording the notice with the county recorder. The notice must contain specific information to be valid. It must warn the vendee that she is in default of the described property and give her a 30-day window to cure it, according to Minnesota Statute 559.21. It must identify what she needs to do to cure the default, including a breakdown of late fees and attorney charges. If the vendee is unable to remedy the problem after the 30-day window, the vendor issues another 30-day warning, giving the vendee 60 total days to fix it.
What Happens Next
If the vendee is able to cure the default, then the contract for deed will resume as written. Should the vendee continue to default, then the vendor will initiate forfeiture and will record a final notice with the county that severs the contract. The vendee will be forced to move and may lose all of his payments, and the house will return to the vendor's possession. The notices that were recorded with the county will serve as official notification of the contract's cancellation.
Minnesota Notice of Cancellation of Contract for Deed
Minnesota provides a general form that vendors can use to sever the contract once and for all. Called the "Notice of Cancellation of Contract for Deed," but also known as Form 30.4.1, the notice certifies that the vendee defaulted on the contract that was recorded in the county of location. It names the vendor and vendee, the property's address, and the nature of the default. It also identifies the purchase price and the percentage of the price that was paid. It must be notarized.
- The Federal Reserve Bank of Minneapolis; Risks and Realities of the Contract for Deed; Crystal Myslajek; January 2009
- US Legal: Minnesota Contract for Deed Laws
- Forms Work Flow: Minnesota Notice of Cancellation of Contract for Deed (2010)
- Freddie Mac. "30-Year Fixed Rate Mortgages Since 1971." Accessed May 3, 2020.
Lisa Bigelow is an independent writer with prior professional experience in the finance and fitness industries. She also writes a well-regarded political commentary column published in Fairfield, New Haven and Westchester counties in the New York City metro area.