Forfeiting a Real Estate Contract

A real estate contract is a contract in which the buyer agrees to pay the seller the balance of the purchase price over time and the seller agrees to deliver a deed to the buyer when the contract is paid in full. Until the contract is fully paid, the seller holds title to the property, subject to the real estate contract.

If the buyer stops making payments on the real estate contract or does not perform other obligations of the contract, the seller can start a forfeiture of the contract. If the contract is forfeited, all of the buyer's rights in the property are terminated. The seller retains title to the property, which is no longer subject to the real estate contract.

Forfeiting a contract satisfies all of the seller's claims against the buyer. If the property is worth less than the amount owed to the seller, the seller may want to bring a lawsuit against the buyer to foreclose the contract. Also, most pre-1986 real estate contracts and some newer contracts do not let sellers add their attorneys' fees to what the buyer must pay to stop a forfeiture. Sellers may want to foreclose such contracts.

Forfeiture is started by giving notices of intent to forfeit the contract to the buyer and other persons who have interests in the property and occupy the property. A specific form of the notice of intent to forfeit is required by statute and the statutes have detailed rules about how the notice must be given.

The buyer then has at least 90 days to pay what is owing to the seller, usually including the seller's attorneys' fees and costs. This is called a "cure of default." If the buyer pays the money in default, the forfeiture must stop.

If the buyer does not pay the required amount within the time allowed, the seller can issue a second notice called a declaration of forfeiture. The form of this notice and how it must be given is also specified by statute.

The recording of the declaration of forfeiture completes the forfeiture. The buyer has a limited right to set aside the forfeiture and has the right to remain on the property at least 10 days after the declaration of forfeiture is recorded.