In general, a land contract can be described as a type of contract that involves the sale of land or other forms of real estate. In the majority of cases, a land contract will be used in a sale for a residential piece of property, such as a house. A land contract, also known as a contract for deed agreement, enables the person buying land to pay monthly installments on the property in question until it is fully paid off, as opposed to having to obtain a mortgage.
When compared to a home mortgage loan, a land contract is often a faster and less expensive way for a buyer to acquire financing to purchase a specific property or home. The catch with these types of contracts, however, is that the seller will be the one financing the sale of their own land until the buyer can pay it off rather than a mortgage lender like a bank.
For example, imagine you wish to purchase a home, but do not have enough money in the bank to do so. You and the seller agree that the seller will finance the sale of their home, but only if you agree to make monthly installments on the home until the seller has recovered the full amount of the sale price, plus any agreed upon interest. Accordingly, you and the seller can enter into a land contract to make this deal legally valid and enforceable.
Some examples of typical land contract terms that an individual may want to incorporate in their land contract agreement may include the following:
- The amount that must be paid by a buyer on a monthly basis;
- The percentage of interest rate that will be collected for each month that the price is not paid off;
- Whether there will be any penalty fees for late or missed payments, and if so, the amount of such fees;
- How long a buyer has to pay off the full land contract;
- The official start and end date of the land contract; and/or
- The process the parties must follow in the event that the terms of a land contract are breached by either party.
What Is Land Contract Fraud?
Land fraud, or land contract fraud, typically occurs when an individual uses tactics of deceit, fraud, or misrepresentation in order to gain a benefit or make a profit off of entering into a land contract deal. For instance, if an individual misrepresents that they are the actual owner of a property and furnishes fraudulent and/or forged title documents to a property, such as a deed, and it turns out that they are not in fact the rightful owner of the property.
Another example of when a land contract may contain fraudulent provisions is when it does not disclose dangerous or defective conditions in relation to a specific property. For instance, if there is a problem with real property that only the owner would know about and is not easily detectable, then this may constitute an instance of land contract fraud if they enter into a contract and do not disclose these details to the interested party.
Some other examples that may prove that a land contract is fraudulent or that an act of land contract fraud occurred include:
- When a party to a land contract provides false or inaccurate financial information;
- If a party to a land contract falsifies details concerning the amount of interest payments, the total value of the property, and/or various other terms that would affect the validity of the land contract in question; and/or
- When a deceitful or fraudulent act violates the provisions of a particular land contract.
In addition, it is important to note that any party to a land contract may be found liable for committing a fraudulent act. A common example of a scenario involving land contract fraud would be when a seller intentionally deceives or misrepresents the actual value of a for-sale property to a buyer.
On the other hand, a buyer may be accused of committing land contract fraud when they deceive or deliberately misrepresent the data contained in a report displaying their financial background.
For instance, if a buyer claims they can afford to pay for the full amount that a house is listed for if they obtain a mortgage loan, but do not earn enough income or have a poor credit score that prevents them from not only taking out a mortgage loan, but also from buying the house.
In some cases, both the buyer and seller involved in a land contract may be innocent. Instead, it may be an individual real estate broker or an entire real estate brokerage firm that may be held responsible for a fraudulent land contract.
This can happen in situations where a real estate broker is using a fake real estate license or when a real estate brokerage firm has false credentials and tricks a buyer or seller into providing them sensitive financial information to use for purposes other than those specified in a land contract.
Are There Any Remedies for Land Contract Fraud?
There are a number of legal remedies that an individual may potentially be able to recover in a lawsuit for land contract fraud. However, whether or not an individual can recover legal remedies for land contract fraud issues will largely be dependent on several factors. These include: the remedies provided under individual state land contract laws, the type of claim that forms the basis of the lawsuit, and if the plaintiff is able to prove and win their case.
Some examples of the potential remedies that one can receive for land contract fraud in accordance with the general principles of land contract laws include:
- Specific performance;
- Rescission or cancellation of a land contract;
- Monetary damages to cover actual losses;
- Modification or creation of a new land contract; and/or
- Various other kinds of state-specific legal remedies.
Are There Any Defenses to Land Contract Fraud?
There are a number of potential legal defenses that a defendant may be able to raise in a lawsuit involving a claim for land contract fraud. Some common examples of the possible legal defenses that a defendant may be able to use in a land contract fraud case may include the following:
- The plaintiff did not file a lawsuit for land contract fraud before the statute of limitations in a particular state expired;
- The plaintiff was unable to prove their case or lacked sufficient evidence to support a claim that land contract fraud existed;
- The plaintiff did not suffer any actual damages for which the defendant could provide compensation or some other legal remedy;
- The plaintiff committed a wrongdoing as well and thus should not be rewarded (i.e., the Doctrine of Unclean Hands);
- The contract does not exist or is found to be invalid (e.g., by coercion, duress, lack of consideration, etc.);
- The defendant did not in fact commit any fraudulent, deceptive, or misrepresentative actions;
- The misrepresentation was actually a unilateral or mutual mistake and not caused by the defendant intentionally; and/or
- The plaintiff did not or could not have reasonably relied on the misrepresentation or fraudulent element at issue in the land contract.
Do I Need a Lawyer for Help with Land Contract Fraud Issues?
Generally speaking, fraud issues involving land contracts and/or real estate agreements can often lead to serious legal ramifications. As such, you may want to consider hiring a local contract lawyer if you need assistance with forming a valid land contract. A qualified real estate lawyer will be able to help ensure that you avoid issues concerning fraud when creating or entering into a land contract with another party.
Your lawyer will also be able to offer important legal advice about federal, local, and/or state laws that may affect the provisions within your land contract. In addition, your lawyer can assist you in reviewing and/or amending the terms of an already existing land contract and will be able to conduct legal research on local land contract fraud cases to determine if you have a viable claim.
Finally, if you wish to sue or are being sued by another party for possible land contract fraud allegations, your lawyer will also be able to help you file a lawsuit and can provide legal representation in the appropriate court if necessary. In the event that you are the defendant in a land contract fraud lawsuit, your lawyer can perform legal research to find out if there are any legal defenses that you can raise against another party’s claim as well.