[minnymeetoo]

We have a contract for deed created by a real estate lawyer, signed and notarized. We are in year 11 of 15 years on the contract. We have never been late and pay all property taxes and insurance on the house since day 1 of the contract. The Sellers are getting a divorce. The Sellers lawyers are claiming our contract for deed isn't worth anything more than the price of the paper and plan to sell the house. We found out yesterday that the original contract was never recorded at the county office. Also found out that the Sellers took out a loan against the house in 2009 for $77,000.00.

1) Is the contract for deed a legal and binding contract even though it was never recorded?

2.) Are they able to sell the house out from underneath us legally?

Thank you,
Velvet

[ScottGem]

Any question on law needs to include your general locale as laws vary by area. But unless the law in your area requires that such a contract be recorded, then the lack of recording won't void it. Very few area do require the recording of such a contract.

If you have a copy of the contract with both the sellers and buyers signatures, especially notarized. I think you have a binding contract. I would strongly suggest you do two things. Get yourself a real estate attorney to go over the contract and record a lis pendens against the property. The lis pendens will record that there is pending litigation against the property and prevent them selling it until the litigation is resolved.

Frankly I think their lawyer needs to go back to school. As far as I can see, you have a written contract, you have proof that you are living in the house and that you have paid all payments required by the contract as well as all taxes. I think a court is going to affirm that you have a contract. That their attorney would make such a statement makes me think he's got an ace up his sleeve.

I think your biggest problem is going to be the loan against the property. Because the contract wasn't recorded, the lender made the loan in good faith. You may have to sue the sellers to pay off the loan so they can convey title to you at the end of the contract.

By the way who's responsibility was it to record the contract.

[minnymeetoo]

We live in South Carolina. The Sellers hired the lawyer and it was signed and notarized Feb 6th, 2004 at his office. So I am not sure who's responsible for recording it, I would have assumed it was the Real Estate lawyer they hired. We have lived in the house until 2 weeks ago that is under this contract. We are now renting the house out. We checked the contract before we moved and it didn't reference anything about it and talked to one of the sellers 2 months before we moved and he didn't say anything and cashed the check for the property taxes and 2 months worth of mortgage as well. Does that void the contract? Do we have to be living in the home if we are still making the payments, insurance, and property taxes? Also, 2 years ago, our house was up for auction for unpaid property taxes and that is when we started having trouble with the sellers and they told us that they were getting a divorce.

BTW - I forgot to thank you for your response

[ScottGem]

You moved out? Why? That was a mistake! You need to get an attorney ASAP. You should have gotten one when you found out they hadn't paid the taxes.

[minnymeetoo]

We tried to get an attorney, everywhere we turned they said the seller was "Uncollectable" and that we couldn't really do anything unless the seller didn't pay the taxes. Thankfully the sellers ended up paying the taxes about 1 month before the auction. We moved out because we had to find a bigger home because we are being appointed by a family court judge in California to adopt my great nephew due to felony child abuse. Long story. We read that we have an equitable title and could rent it. Is that not the case? Did we just screw ourselves out of that contract? I will start making calls in the morning to find an attorney and hopefully someone will take us this time. Thank you again for your response. I am really scared now.

[Fr_Chuck]

First the contract is legal and binding. Your moving out may have voided a term, I know all of my contracts require that the people live IN the HOUSE and if they move out, they void the contract. So check, I have never seen one that did not include that.

Also it is easy, you go register the contact, you needed to have done that from day one.

But it is also legal for them to get a loan on the property, that is the largest risk of a contact for deed, you pay and pay, and then the deed not clear when you finish paying.

You could rent the house (or even sell or transfer the contract) if the contract allowed it. I would never allow that in my contracts.
** I did that since I wanted reasons to take the house back. * that is how I made my money, selling the same house over and over, when people could not pay or had to move.
** not nice, perhaps, but this is standard in these types of contracts.

Any attorney should take you, if you pay their hourly fee. No attorney will take you on case like this, if they only get paid if they recover money from other side.

[ScottGem]

Ok, I didn't understand that you moved because of the need for larger quarters. I thought you moved because you were told they were going to sell. However, you need to check the contract. If the contract requires that you remain in the house, you have a problem. Where did you read about equitable title?

As to hiring an attorney I think you asked the wrong questions. Any attorney would handle defending your interest in the house for a fee. However, you might have trouble finding an attorney to sue them on a contingency basis. This is where the loan on the house comes into play. The contract probably says that, at the end of the contract they will convey clear title to you. But if there is an outstanding mortgage, they can't do that. And you would have cause to sue. I'm wondering how they could be uncollectable if they could afford an attorney.

[minnymeetoo]

We checked the contract over and over again, there wasn't anything in there that stated we remain in the house just that we had to pay all taxes and insurance and the agreed upon amount for the mortgage. It said we had to take possession of the property but no clause in there or anything. I checked South Carolina law on Contract for Deed and that is where they listed a hard title was held at the seller and a equitable title for the buyers. I could try and upload the contract and darken the names for you to verify but like I said, we read it again last night and it is a very simple contract. It talks about defaulting for money not paid but that was it. I am sure that it was on a contingent basis and included would be monies owed to the lawyer for legal fees. Thank you both for your responses.

I have another question. If we register the contract, do we automatically assume the mortgage on the house? It was something someone said to us.

[AK lawyer]

No, if you record (or "register") the contract; that would not make you personally liable under the mortgage.

But I would talk to an attorney versed in real estate law. My gut feeling is that the sellers may be contemplating bankruptcy, so you would need the contract to be recorded in order for your interest to be fully protected.

[ScottGem]

Recording the contract simply puts your interest in the property public record. The sellers might have had a harder time getting the loan if the lender knew there was someone purchasing the property under a contract for deed.

The problem is, even if you record it now, your interest may be secondary to the lender. I'm not sure about that, which is why you need a local lawyer to advise you. Its good that there is nothing in the contract requiring you to remain in the house.

The thing that bothers me most is their lawyer's comment about the value of the contract. That is a very stupid thing for a lawyer to say unless he knows something we don't.

[AK lawyer]

I wonder if the "Sellers lawyers" (The quoted language is ambiguous; did OP mean "Sellers' " or "Seller's" and if the latter, which seller?) are representing one of them in the divorce. If the lawyers are divorce lawyers, could there be an issues as to whether the lawyers' client (the husband or the wife) authorized the contract?

[ScottGem]

According to the OP they have a contract " signed and notarized". I'm assuming this was signed by all parties. But that's not a given.

[talaniman]

That's why you should have your own lawyer.