A contract is considered an Instalment Contract when the Buyer pays the purchase price of a property in increments over time to the Seller and does not obtain a transfer of title from the Seller until the last payment is made, a drastically different situation than the usual land sale contract. A contract is also deemed an instalment contract when the Buyer is obligated to pay more than ten per cent of the purchase price without receiving the title. Other components of Instalment contracts include:
1. Seller is prohibited from selling or mortgaging the land
2. Buyer may lodge a caveat against the land
3. Buyer may demand a conveyance of the land from the Seller once the Buyer has paid a third of the purchase price. Seller may also demand a mortgage back for the remaining monies due, which would transfer the title to Buyer at this point.
4. Seller may also request a conveyance of the land from the Buyer, but the Seller may be obligated to pay an advance for the transfer fees, which would be added to the purchase price and paid back by the Buyer over time.
Instalment Contracts may cause issues when the Buyer or Seller defaults or when the contract does not clearly state the terms of many possible circumstances which may include defaults, stamp duty, consent to mortgages, interest charges, bankruptcy of the Seller, negative search results and equitable charges.
It is important for the Buyer to clearly state all possible circumstances in the contract and also to lodge a caveat on the property which would not allow the Seller to do anything with the property without the Buyer’s knowledge or consent.