Tuesday, January 10, 2017

Contract for Deed vs. Conveyance of Real Property

A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full.

The probate court's order expressly granted Edward's one-half community interest in the property to "his rightful heirs," and Connie does not dispute that Don and Esther are his rightful heirs. At the time of Edward's death, however, Connie and Edward did not have an ownership interest in the property because Mary Rose—as the seller of the property under a contract for deed—retained title to the property. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005) ("A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full."); Sluder v. Ogden, No. 03-10-00280-CV, 2011 Tex. App. LEXIS 267, at *10 (Tex. App.-Austin Jan. 13, 2011, pet. denied) (mem. op.) (noting that "contract for deed merely establishes conditions precedent to a title's transfer" (citing Graves v. Diehl, 958 S.W.2d 468, 470-71 (Tex. App.-Houston [14th Dist.] 1997, no pet.)).

The evidence established that Connie and Edward had not fully performed under the terms of the contract for deed at the time of Edward's death. Under an executory contract to convey land, such as a contract for deed, the buyer does not acquire title but an "equitable right to make payments on the property and to receive a deed and legal title when [the buyer] complete[s] the payments." See Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.) (citing Johnson v. Wood, 157 S.W.2d 146, 148 (Tex. 1941) and Texas Am. Bank/Levelland v. Resendez, 706 S.W.2d 343, 345 (Tex. App.-Amarillo 1986, no writ)); see also Southern Vanguard Ins. Co. v. Silberstein, No. 14-09-00472-CV, 2010 Tex. App. LEXIS 6202, at *9-12 (Tex. App.-Houston [14th Dist.] Aug. 3, 2010, no pet.) (mem. op.) (concluding that purchaser did not obtain equitable title when entered into contract for deed and explaining differences between contract for deed and mortgage).

SOURCE: AUSTIN COURT OF APPEALS - No. 03-12-00146-CV. - 8/26/2014 


A contract for deed is an executory contract constituting an agreement by a seller to deliver a deed to property once certain conditions have been met. See Graves v. Diehl, 958 S.W.2d 468, 470 (Tex. App.-Houston [14th Dist.] 1997, no pet.). Until the executory contract is fully performed, the owner retains legal title to the property, but holds that title subject to the purchaser's equitable right to complete the contract, i.e., to make payments and receive a deed once payments are completed. See Gaona v. Gonzalez, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.)Graves, 958 S.W.2d at 471. The seller is not obligated to deliver legal title to the property until the purchaser pays the purchase price in full. See Salinas v. Beaudrie, 960 S.W.2d 314, 319 (Tex. App.-Corpus Christi 1997, no pet.). Under a contract for deed, the purchase price is usually paid in installments over a course of years. Id. In the present case, there was undisputed evidence that Ware did not make the payments required by the December 15, 2005 document she contends is a contract for deed. According to that document, Ware was to make eighty monthly payments of $500 to pay the $40,000 purchase price. Assuming her first payment was made in November 2005, Ware was required to pay $500 per month until June 2012. It is undisputed that Ware stopped making payments in the fall of 2008 and made no further payments required by the December 15, 2005 document.[6] Thus, even though Ware was not obligated to make the payments set forth in the contract for deed, Ware's failure to make those payments meant that title to the Property remained with the seller. See Graves, 958 S.W.2d at 471 (purchaser's equitable right does not ripen into equitable title to property until he has fully performed under the contract, i.e., paid the full purchase price). The trial court was therefore correct in its conclusion that the Estate owned the Property. We overrule Ware's sixth appellate issue.[7]

SOURCE: HOUSTON COURT OF APPEALS - No. 03-14-00083-CV. - 12/22/2015 


A contract for deed is a form of real-property conveyance in which the purchaser obtains an immediate right to possession, but the seller retains legal title and has no obligation to transfer it unless and until the purchaser finishes paying the full purchase price (and, often, interest, fees, or other related obligations), which is typically done in installments over several years. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005) ("[E]xecutory contracts [are] also known as contracts for deed. 

A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full."); Reeder v. Curry, 294 S.W.3d 851, 856 (Tex. App.-Dallas 2009, pet. denied) ("In an executory contract for the sale of land, such as the contract for deed in this case, the superior title remains with the seller until the purchaser fulfills its part of the contract" and "[i]f the purchaser defaults under the contract, the seller is entitled to possession of the property."); Ward v. Malone, 115 S.W.3d 267, 270-71 (Tex. App.-Corpus Christi 2003, pet. denied) (stating that a "contract for deed is an agreement by a seller to deliver a deed to property once certain conditions have been met and that it entitled the buyer to immediate possession, that the seller retains title until the purchase price is fully paid, and that the price is typically paid in installments over several years). 

A contract for deed differs from a conventional contract for sale of realty, in which the seller and purchaser mutually agree to complete payment and title transfer on a date certain (the "closing date"). See Flores, 185 S.W.3d at 429. Unlike a contract for deed, under which the buyer has an equitable right, but not obligation, to complete the purchase, Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.), the buyer under a typical real-estate contract is contractually obligated to complete the purchase and may be liable for breach upon failure to pay the seller. Carroll v. Wied, 572 S.W.2d 93, 95 (Tex. Civ. App.-Corpus Christi 1978, no writ)("In a contract of sale, one party is obligated to sell and the other to purchase.").

Based on the foregoing case law and the facts in this case, we disagree with Tran's assertion that the underlying contract is an executory contract. Specifically, the record reflects that Luu signed and conveyed a warranty deed on the day of closing with no vestige of title to the property, even though Tran is still making payments on the note. See, e.g., Brown v. De La Cruz, 156 S.W.3d 560, 566 (Tex. 2004) ("Since 1995, the Texas Property Code has required that sellers by executory contract (or `contract for deed') of certain residential property in Texas must record and transfer a deed within thirty days of final payment."). Indeed, there is no evidence in the record demonstrating that Luu withheld transfer of title or refused to sign the deed subject to Tran completing all installment payments associated with the purchase of the property.

SOURCE: WACO COURT OF APPEALS - No. 10-13-00308-CV. - 4/10/2014 

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