Contracts for deed are a way to buy a house without a mortgage. Instead of borrowing from a bank, you sign a contract to pay the seller a monthly installment on the purchase price, plus interest. The seller holds the deed — the document granting title — and transfers title to you when the contract is paid off. Certain Kansas laws on contracts for deed are found in Chapter 16, Article 2, of the state statutes.
Kansas law states that the annual interest rate on both first mortgages and contracts for deed are limited to 1.5 percent above the limit of a 30-year fixed-rate mortgage; interest can never be more than 15 percent a year. This doesn't apply to contracts with adjustable interest rates. If a court finds the seller guilty of a higher rate of interest, the seller has to pay back twice the excess interest, plus the buyer's court fees.
According to Kansas case law, a purchaser using a contract for deed is considered an "equitable owner," someone with the rights and benefits of ownership, even though the seller still holds the title. Unlike buying with a mortgage, the purchaser in a contract for deed arrangement can't transfer title to the property to someone else. He can, however, use the property, make improvements to it and sue to protect his rights to enjoy it.
If the homebuyer defaults on the contract, the Kansas seller has the right to foreclose and reclaim the property, just as a mortgage lender does. However, the law obligates the seller to give the buyer reasonable time to make up the missing payments. When the case goes to court, a Kansas judge has flexibility in the interest of being fair to both parties: She could decide there's no default; rule that the buyer can recover his previous payments; or allow the foreclosure to proceed with the seller keeping the land and the payments.
The seller has the right to have one of his heirs inherit the property upon his death, which can be done with a transfer-on-death deed. This doesn't end the contract for deed: The heir takes title subject to the contract. The deed isn't a will and doesn't have to comply with Kansas' law on wills; it also overrides any distribution of property in the will. If the buyer has been making regular payments under the contract, the transfer shouldn't affect his ownership.
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