The legal process to remove a buyer under a contract for deed will depend on the language of the contract for deed and what contributions the borrower has made towards the purchase price. As the lessee/purchaser is leasing the property, the default process would be to file an “unlawful detainer” action and to remove the lessee/purchaser through an eviction action.[1] In this instance, the lessee/purchaser would forfeit the payments made under the contract to deed upto that point and be removed from the property.[2] A judgment may also be entered for any past due payments at the time of the eviction. With that being said, the Kansas Courts have held that when the party under a contract for deed has paid “a substantial portion of the purchase price with reasonable promptness,” the lessee/purchaser may have an equitable interest that requires foreclosure.[3] In these instances, lessee/purchaser cannot be removed through an eviction.
The question of what constitutes a “substantial portion of the purchase price with reasonable promptness” is a factual decision that will depend on the circumstances of each case.[4] If the down-payment made by the lessee/purchaser is similar to a standard lease down payment and the borrower has only made a few payments, the court will usually not find that the lessee purchaser has an equitable interest.[5] Moreover, whether or not a portion of the payment is credited towards the purchase price and how much is credited are also important factors.
With this being said, the question that has the most impact on what it takes to remove a buyer under a contract for deed is not if there is an equitable interest, but rather if the court will think there is enough of a question on that issue that the case can not be decided in the eviction court.
In order to explain this in more detail, a little background on the Kansas court system is needed. At the trial court level, there are two statutory chapters under which most civil suits are brought. The first chapter is K.S.A. Chapter 60. This is the standard civil procedure chapter and courts hearing cases under this chapter have general jurisdiction or can hear any type of case. The second chapter is K.S.A. Chapter 61. Judges hearing cases under Chapter 61 may be district court judges but often are magistrate judges. Furthermore, the types of cases that can be heard under Chapter 61 are limited to specific types of cases.[6] These cases include evictions, collection actions, and lower dollar claims. Courts hearing cases under Chapter 61 are explicitly prohibited from making decisions that affect an ownership interest in real estate. As such, if the court thinks there is a dispute over the existence of an equitable interest in the property, it must transfer the case to a Chapter 60 court.
In Kansas, the eviction process is very regimented. Once the petition is filed, an initial appearance is set within fourteen (14) days.[7] If the tenant appears and denies owing rent (or any other basis for the eviction), the case is set for a trial within fourteen days (14) of the initial hearing.[8] Once the judgment is entered, the Sheriff has fourteen (14) days to remove the tenant.[9] In all, this process should be completed within six (6) weeks or less.
Chapter 60 courts do not follow this regimented eviction schedule. Therefore, even if it is ultimately determined the lessee/purchaser does not have an equitable interest, it can take many months to reach that decision.
The exact timeline for a Chapter 60 case can vary depending on the caseload of the court, the motions filed by the lessee/purchaser, and other factors. A best-case scenario is several months. A worst-case scenario would be a year or more. During this period, the lessee/purchaser will continue to be responsible for payments and the court may order that payments be made into the court’s registry. The court may also order that the lessee/purchaser be evicted if payments are not made. It should be noted, however, that requiring payments and the remedy for missed payments is entirely within the discretion of the court and may or may not be ordered in all cases.
Once a judgment is entered in a contract for deed foreclosure, the judge must determine how the equitable interest will be foreclosed. There is case law that supports the conclusion that a sale must be conducted similar to a mortgage foreclosure and that the borrower will be responsible for any deficiency between the sale price and the amount that was to be paid under the contract.[10] If a sale is conducted, the landlord/seller would have the right to “credit bid” at the sale or bid the amount owed without paying any money.
With that being said, many judges find that the interest can be equitably foreclosed by simply providing the lessee/purchaser with a period of time to redeem the property by paying the entire purchase price originally agreed upon under the contract. Once that period has expired, the landlord/seller takes the property back and can retain all of the funds paid by the lessee/purchaser.
Although the court is not bound by these timelines, the court may look to the Kansas redemption periods for mortgage foreclosures as guidance for the length of a redemption period in a contract for deed foreclosure. The standard redemption period in a mortgage foreclosure action in Kansas is three (3) months if less than one-third (1/3) of the original purchase price is paid or twelve (12) months if more than (1/3) has been paid.[11] The longest redemption period I have had applied in my contract for deed cases is six (6) months. The shortest was a judge that allowed the lessee/purchaser to remain in the property (while paying rent) for a month and a half, but not the actual right to redeem. Because these are “equitable decisions” the judge is empowered to do what he or she feels is just and right in the situation.
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[1] See Letzig v. Rupert, 209 Kan. 143 (1972); Atichison Sav. Bank v. Richards, 131 Kan. 81, 85 (1930).
[2] Id.
[3] See e.g. Obsterhout v. Brandts, 114 Kan. 537 (1923).
[4] Allen v. Silk, 1990 Kan. App. LEXIS 175 (Kan. Ct. App. 1990).
[5] Letzig, at 143.
[6] K.S.A. 61-2802
[7] K.S.A. 61-3806
[8] K.S.A. 61-3807
[9] K.S.A. 61-3808
[10] See e.g., Barnett v. Oliver, 18 Kan. App. 2d 672, 684 (1983)
[11] K.S.A. 60-2414
