If you are entering into a non-standard real estate purchase contract, such as a Lease with an Option to Buy, a Contract for Deed—sometimes called a Installment Sale Contract—you need to be aware of strict legal requirements under North Carolina Law. North Carolina General Statutes Chapter 47G governs all leases that include an option to purchase. North Carolina General Statutes Chapter 47H governs a “Contract for Deed”, or installment sale agreements. Chapters 47G and 47H were enacted into law in 2010 with the goal of protecting purchasers who enter into non-traditional real estate purchase contracts. Any residential purchase that does not involve payment in full (either by cash or with a mortgage) and transfer of title at the time of closing is likely regulated by one of these chapters. If you are entering into such an agreement you should be mindful of these requirements, because failure to comply can be costly.
Chapter 47G regulates any “residential lease agreement that is combined with, or is executed concurrently with, an option contract.” NCGS 47G-1(1) All leases that include an option must be recorded with the Register of Deeds where the property is located, and the burden to record the lease and option is on the seller. NCGS 47G-2(g) The are strict statutory requirements as to what must be included in the lease. The penalty on the seller for failure to include all required terms or failing to record the lease with the Register of Deeds can be severe — such failure constitutes an Unfair Trade Practice under Chapter 75 of the North Carolina General Statutes subjecting the seller to triple damages and attorneys fees if the failures result in damage to the buyer.
Chapter 47H governs any “agreement, whether denominated a “contract for deed,” “installment land contract,” “land contract,” “bond for title,” or any other title or description in which the seller agrees to sell an interest in property to the purchaser and the purchaser agrees to pay the purchase price in five or more payments exclusive of the down payment, if any, and the seller retains title to the property as security for the purchaser’s obligation under the agreement.” NCGS 47H-2 sets forth 17 items that must be included in a covered agreement. Significantly, the Agreement must be recorded, must set forth who is responsible for all expenses (taxes, insurance, repairs, etc.), and several other required legal notices. NCGS 47H-4 sets forth requirements of the steps a seller must take terminate a contract when a buyer defaults. Like Chapter 47G, any violation of Chapter 47H by a seller can subject a seller to significant damages.
If you are buying or selling a residential property by using a non-traditional contract, contact a lawyer at the Greensboro Law Center to make sure you are protecting yourself and complying with these laws.
Contact the Greensboro Law Center TODAY for a free consultation.