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What About that Land Contract: Does it violate a Leasing Restriction? | Legal Insights Blog

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What About that Land Contract: Does it violate a Leasing Restriction?

If an owner sells his condominium unit to someone under a land contract, the buyer becomes an “equitable” owner under Ohio law.  A land contract is nothing more than a type of owner financing for the purchase of the unit.  The seller keeps legal title to the unit until the contract is paid, and the buyer has an “equitable” title until actual title is received.

Therefore, it is not a violation of a leasing restriction if the property changes hands under a land contract; however, land contracts must meet certain very specific requirements under Ohio law in order to be considered a valid land contract and not a “lease.”  ORC  5313.02(A) requires that each land contract contain 16 specific items, among which are  the names and mailing addresses of the buyer and seller, date of signing, amount of the purchase price, down payment amount, interest rate and method of computing the rate, the legal description,  the amount of each installment payment and due date, a statement of any mortgages on the property, whether a warranty deed will be delivered at the end of the contract, provisions for title insurance,  provisions regarding the payment of taxes and assessments (condo fees),  the right of the purchaser to pay any delinquent mortgage payments missed by the seller,  and that the seller record the contract on the public record within 20 days of execution.   It is therefore possible for the Board to be very picky about the validity of a land contract since rarely does a land contract meet all of the requirements of the statute.  In this way, the Board may defeat a land contract under an anti-leasing provision because the land contract does not comply with the statute.

Once the land contract is recorded and  meets all the requirements of law, the Board may want to regulate how the land contract is to be treated going forward; various questions can be answered by a well-crafted Rule.  For example, the Rule may provide that a copy of the land contract must be given to the Board;  that all rights and obligations under the condominium documents will be transferred to the buyer including voting rights; that both the buyer and seller will be jointly liable for the payment of condominium assessments regardless of the what the contract says;  and that the buyer and seller are required to provide the Board with current  mailing addresses and phone contact information  for both of them.  Under this Rule, the legal owner would have no right to vote or use the condominium sports facilities since those rights would transfer to the buyer. In this way the Board will have a clear policy in place when questions arise as to who has rights to do what in the condominium. 

If you have a question about the legality of a land contract or any other question regarding condominiums or homeowner associations, please call us at 614-228-0207.

Jaime Willet