Expert: Dick Dennis - 12/6/2006

Question
I'm considering entering into a land hold contract on a property I own. I would hold a land contract at 7% -20 yr payout and 5 yr balloon (pmt to be 1201.25 plus taxes). my questions is who will be responsible for any maintenance on this property and can I refinance this property during the leased 5 years.  

Answer
When you sell a property on a land contract, he (the buyer) is considered the owner and therefore he must pay the taxes and maintain the property. However, you are still the registered owner (much like a bank and your owning a car). As the registered owner you should keep your eye on everything to make sure the property is maintained, the taxes are paid, etc. If there are other things that should be done, then they should be expressed in a signed agreement.

You, as the registered owner, are considered the owner  should anyone sue you. So, it is a negative for the buyer. Should anyone sue you, and if you lose, they could take the property because legally the property was yours.

As far as maintaining the property, you should draw up an agreement (with a real estate attorney) that stipulates that the apparent owner does not incur any lien or encumbrance without your signature and approval.

I strongly suggest you have a real estate attorney draw up the agreement for you to protect your interests. You should also have the buyer pay for any and all document costs. The attorney will explain further what is required in your state. One other thing. You may want to provide for a change in registered owner once the buyer has paid X amount of dollars toward the purchase price and then he would execute a mortgage or trust deed to you for whatever the balance is.

I do wish you well.

Dick Dennis