John Roska: An 'election of remedies': Eviction or foreclosure
Q: I tried to sell a house on contract. The buyer is behind on the payments. How do I get them out? Can I also recover the missed payments?
A: If you want them out, you'll have to evict or foreclose. It depends on how much has been paid. If 20 percent of the purchase price has been paid, you must pursue foreclosure. If not, you can evict.
A foreclosure can get you the property back, and a money judgment. An eviction will get you the property, but no money.
If eviction is an option, but you want money, you could just sue for the payments due under the contract. But you can't sue for both the money and the property. You must choose one or the other.
That's called an "election of remedies." Illinois cases make it very clear that when eviction is an option, a contract for deed seller must elect a remedy — recovering the property or recovering the money.
As the Illinois Supreme Court put it in 1931, a seller who cancels a land contract in order to recover the property "cannot change his position and thereafter hold the purchaser liable to complete the purchase or pay any part of the unpaid purchase money."
Contracts for deed, or land installment contracts, are sometimes called the "poor man's mortgage." They're used when a buyer can't get a bank loan.
In a contract for deed, the seller promises to convey title when the seller completes all the promised payments. Until then, title to the real estate stays with the seller.
In a mortgage, a third-party lender pays off the seller and deals with the borrowing buyer. If the buyer defaults, it's the bank's headache.
In a contract for deed, seller and buyer deal with each other directly for the life of the contract. If the buyer defaults, it's the seller's headache.
Recovering the property when the buyer defaults depends on how much has been paid. If they've paid at least 20 percent of the purchase price (including the down payment), the seller must foreclose, even though there's no mortgage.
A foreclosure takes at least seven months, and gives the buyer lots of rights. Most importantly, the buyer can avoid foreclosure by reinstating (catching up missed payments) or by redeeming (paying off the mortgage).
If the buyer has paid less than 20 percent of the purchase price, the seller can evict. That starts with a written notice that gives the buyer at least 30 days to avoid eviction by catching up the missed payments.
In an eviction, contract for deed buyers have a right that regular tenants don't have. That's the "right to cure," after an eviction judgment has been entered against them.
The buyer gets up to 60 days to "cure" by catching up the missed payments. If they do, and pay the court costs, and attorney fees (if provided for in the contract), then they're back on track and the case is dismissed.
If the buyer doesn't cure, the seller gets the property back. They can't, though, get any more money, beyond the payments already received.
John Roska is a lawyer with Land of Lincoln Legal Assistance Foundation. You can send your questions to The Law Q&A, 302 N. First St., Champaign, IL 61820. Questions may be edited for space.