I have a client considering a Bond for Deed contract to purchase property. In a previous newsletter, you mentioned there were some specifics that Louisiana law has for Bond for Deed contracts. Could you elaborate?
Absolutely! In the spirit of brevity, I provide below some bullet point highlights of the Bond for Deed laws.
The laws governing Bond for Deed transactions can be found at Louisiana Revised Statutes 9:2941, et. seq.
According to La. R.S. 9:2941, a bond for deed is a contract to sell real property, in which the purchase price is to be paid by the buyer to the seller in installments and in which the seller after payment of a stipulated sum agrees to deliver title to the buyer.
According to La. R.S. 9:2941.1, upon the recordation in the mortgage and conveyance records of a bond for deed contract, any subsequently filed sale, lease, mortgage, lien, etc. shall be subject to the rights created by the bond for deed contract. (This provision shall not apply to tax sales or redemptions as provided for by R.S. 47:2171, et seq.)
According to La. R.S. 9:2942, it shall be unlawful to sell by bond for deed contract, any real property which is encumbered by mortgage or privilege without first obtaining a written guarantee from the mortgage and privilege holders to release the property upon payment by the buyer of a stipulated mortgage release price. This written agreement shall be filed in the mortgage and conveyance records.
According to La. R.S. 9:2947, any person who sells by bond for deed contract any real property encumbered by mortgage or privilege without first obtaining and recording the guarantee required by R.S. 9:2942, shall be fined not more than one thousand dollars, or imprisoned for not more than six months, or both.
According to La. R.S. 9:2943, all payments by the buyers under bond for deed contracts of property then or thereafter burdened with a mortgage or privilege, shall be made to some bank authorized to do business in this state, which shall have been designated as the escrow agent for all parties interested in the contract.
According to La. R.S. 9:2945, if the buyer under a bond for deed contract defaults on the payments, the seller may have the bond for deed canceled by proper registry in the conveyance records, provided he has first caused the escrow agent to serve notice upon the buyer, by registered or certified mail, return receipt requested, at his last known address, that unless payment is made as provided in the bond for deed, within forty-five days from the mailing date of the notice, the bond for deed shall be canceled.
If the seller owns the property out-right (i.e. there is no mortgage and, thus, there is no escrow agent) and the buyer defaults, the seller shall exercise the right of cancellation in the same manner.
For any questions regarding this email, please contact me at firstname.lastname@example.org.
H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.
The information contained herein is simply for informational purposes only and not intended to provide legal advice or create an attorney-client relationship.