Installment Land Contracts--The National Scene Revisited

In 1977 we published an article in this Review that discussed the legal aspects of the installment land contract. The installment contract was then, and continues to be, widely used as a device for seller financing of real estate. In our judgment, and increasingly in the judgment of the courts, that is a mistake. Few situations, if any, would lead an informed lawyer to advise his client to use an installment contract rather than its financing cousin, the note secured by a mortgage or deed of trust. Since the prior article was published, the courts have continued to place impediments in the path of the vendor who must realize on the security of the contract. The law has grown increasingly complex and disadvantageous to vendors. The installment contract device persists only because of a lack of understanding by buyers, sellers, and brokers, and because most such transactions occur without a lawyer\u27s involvement. Unfortunately, the role of counsel is typically to pick up the pieces after the contract has been executed and default has occurred. In the present article we give renewed attention to the familiar problems covered in our prior work and focus on several new issues. In particular, we focus on issues relating to the parties\u27 use of their contract rights as security for further financing, the rights of creditors of the parties, and recent developments in bankruptcy and federal income tax law. More than half of the material is new, but readers acquainted with the previous article will find that much of its structure and analysis survives