Land contract
A land contract is an installment contract for real estate under which the buyer pays the price over time and receives the deed later, once the contract's terms are met. The same phrase is also used loosely for an ordinary purchase contract on a piece of land.
An installment contract and a land purchase contract share one name
The phrase covers two instruments that run in a different order. In an installment contract the buyer moves toward ownership one payment at a time and the deed comes at the end. In an ordinary purchase contract for a tract of land, the price is paid and the deed changes hands together, at a closing.
| Installment land contract | Purchase contract for land | |
|---|---|---|
| What it does | Sells the property on payments over time | Sets the terms for a sale that closes later |
| When the deed passes | Later, under the contract's terms | At closing |
| Money paid up front | Whatever the contract calls for | An earnest money deposit, if the contract calls for one |
| Form 1099-S | Reportable in the year the parties enter into the contract | Filed by the person responsible for closing, generally the settlement agent listed on the statement |
| Residential protections | Can fall under Virginia's Residential Executory Real Estate Contracts Act, when the buyer occupies or intends to occupy it as a primary residence and the vendor is not one the Act excludes | Not that Act |
On the second kind, the money a buyer puts down before closing is the deposit, covered in what earnest money on a land purchase contract is, and the deposit itself has an entry under earnest money.
Neither kind is the same as a sale where the seller lends part of the price but the deed still passes at closing; that is seller financing. And a paid right to buy later, without any obligation to buy, is an option, set out in what an option contract on land is.
Where the buyer makes it a primary residence, a named Virginia act can govern
The installment kind has its own statute in Virginia when it is residential. Chapter 30 of Title 55.1 is the Residential Executory Real Estate Contracts Act, and Va. Code 55.1-3000 defines the contract it covers.
means an installment land contract, lease option contract, or rent-to-own contract by which a purchaser acquires any right or interest in real property other than a right of first refusal and occupies or intends to occupy the property as his primary residence.
Va. Code 55.1-3000
The residential kind is treated very differently: a contract under the Act is subject to the Virginia Residential Landlord and Tenant Act, among other protections. When the Act applies, and what else it gives a purchaser, are laid out in what a land contract is.
Offered an installment contract on land instead of a closing?
An installment offer changes when the deed moves and who holds title in the meantime. Share the county and the proposed terms, and Lowell can talk through that difference; drafting stays with an attorney. No cost, no obligation.
Got it. Thank you.
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Questions about this term
Is a purchase contract with a closing date far off a land contract in the installment sense?
Not because of the wait. What makes a contract an installment land contract is that the buyer pays the price over time and receives the deed later. A purchase contract with a distant closing date still calls for the price to be paid and the deed delivered at that closing, and any deposit under it is earnest money. Which kind a particular contract is turns on its terms, which is an attorney's reading.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- Va. Code 55.1-3000: definitions, Residential Executory Real Estate Contracts Act Code of Virginia
- Va. Code 55.1-3001: exemptions from the Act Code of Virginia
- Va. Code 55.1-3002: application of the VRLTA and purchaser protections Code of Virginia
- Va. Code 11-2: contracts for the sale of real estate must be in writing Code of Virginia
- Va. Code 55.1-407: recording of written contracts and deeds Code of Virginia
- Instructions for Form 1099-S Internal Revenue Service