Land Contract Default Rules in Michigan: What You Need to Know

A land contract, also known as a contract for deed or installment sale agreement, is a type of real estate purchase in which the seller provides financing to the buyer. This means that instead of obtaining a traditional mortgage from a bank, the buyer makes payments directly to the seller until the purchase price is paid in full.

However, as with any type of real estate transaction, there is always a risk of default. In other words, the buyer may fail to make the required payments, leading to legal complications and potential loss of the property for both parties involved.

In Michigan, there are specific rules and regulations pertaining to land contract defaults. Here’s what you need to know:

Notice of Default

If the buyer fails to make a payment on a land contract, the seller must provide a notice of default. This notice must be sent via certified mail to the buyer’s last known address.

The notice of default must include the amount of the payment due, the date by which it must be paid, and a warning that if the payment is not made, the land contract may be terminated. The notice must provide the buyer with at least ten days to cure the default (i.e. make the payment).

Termination of the Land Contract

If the buyer fails to cure the default within the specified time period, the seller may terminate the land contract. This must be done in writing and sent via certified mail to the buyer’s last known address.

The termination notice must include the reason for termination (i.e. buyer’s failure to cure the default), the effective date of termination, and information about any payments or fees that the seller may retain.

Forfeiture of Buyer’s Interest

In Michigan, if the land contract is terminated due to the buyer’s default, the seller may be entitled to take back possession of the property. This is known as forfeiture of the buyer’s interest.

However, the buyer has the right to redeem the property by paying the full amount owed under the land contract, plus any fees or costs incurred by the seller as a result of the default.

Conclusion

Land contract default rules in Michigan can be complex and confusing. As a buyer or seller, it’s important to be aware of your rights and responsibilities under the law. If you’re considering entering into a land contract, it’s a good idea to seek the advice of a qualified real estate attorney to help you navigate the process and protect your interests.