Should I File a Deed Before a Contract for Deed is Fully Performed?

Full Question:

I signed a Contract for Deed with a man December 7th, 1995. He is 3 months behind in notes, insurance cancelled, and 2 years taxes owed on the house and property (3 lots). I sent him a certified letter and a letter by mail telling him the amount of taxes he owed (2007-2008 $1,581.78), He had to have insurance at all times, and the house notes for (August, September, October were due now. He reinstated the insurance and I think paid the taxes but 3 months later he still has not made a payment on the house. His notes are only $162.28 a month. He now owes 6 months ($973.68) and on the 29th he will owe 7 notes. He never filed the original Contract for Deed. I had him sign a Quit Claim Deed at the beginning of the Contract that he had notarized because he owes taxes of some kind and was afraid he would lose his house. I had an attorney to tell me to have him sign the Quit Claim Deed so that in the future like now all I had to do was file the Quit Claimed Deed. I need to know if I file the Quit Claimed Deed what else would I need to do if any thing? He has been in the rears almost all the time. His insurance has cancelled 3 times. He only owes $3,352.09 + late payments he has never paid ($1,975.00 late notes owed) = $5,327.09 and the house will be paid for but I am paying a finance company the notes and I need to get the money or he needs to go. I would appreciate your help. Thank You.
01/26/2010   |   Category: Contract for Deed   |   State: Texas   |   #20642

Answer:

In a land contract, the buyer typically doesn't receive the deed until all payments are made and the owner wants to transfer ownership to the tenant. By filing the deed, you will be giving ownership of the property to the grantee named on the deed. A buyer behind in payments may be sued for the money owed under breach of contract principles, and possibly evicted for failure to pay.

A contract for deed, or land contract, is often used as an alternative means of financing the purchase price of property. The buyer does not receive an actual deed until payments are made under the terms of the contract for deed agreement. Until the buyer receives a deed, ownership isn't transferred and the property is subject to being foreclosed on if the mortgagee/owner defaults on the mortgage. The responsibility for payment for the property is a separate issue from the ownership of the property.

If there is a mortgage on the property, the contract may violate a due-on-sale clause in the mortgage which the lender may or may not seek to enforce. Most lenders require that the mortgage or deed of trust contain a due on sale clause. This is an acceleration clause in a loan, calling for payment of the entire principal balance in full, triggered by the transfer or sale of a property. Such a clause permits a secured mortgage lender (federal, state or private) to call the entire unpaid loan balance due and payable immediately if the property securing the loan is sold, transferred, traded, gifted or otherwise disposed of without the lender’s prior written consent.

An unjustifiable failure to perform all or some part of a contractual duty is a breach of contract. A legal action for breach of contract arises when at least one party's performance does not live up to the terms of the contract and causes the other party to suffer economic damage or other types of measurable injury. A lawsuit for breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach. Remedies for contractual breaches are not designed to punish the breaching party. The five basic remedies for breach of contract include the following: money damages, restitution, rescission, reformation, and specific performance. A money damage award includes a sum of money that is given as compensation for financial losses caused by a breach of contract. Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain that would have accrued but for the breach. The type of breach governs the extent of damages that may be recovered.