Chapter 7: Home Ownership Issues—Mortgages and Land Contracts¹

7.1Forfeiture of Land Contracts

“When a vendee purchases property under a land contract, the vendee becomes, in a real sense, the owner of that property.” Batton-Jajuga v Farm Bureau Gen Ins Co of Mich, 322 Mich App 422, 438 (2017). “While the vendee may not immediately acquire full title in the property, the vendee does acquire equitable title and the remaining legal title is simply held in trust by the vendor.” Id. at 438.

If the terms of a land contract expressly provide for termination or forfeiture of the contract following nonpayment of moneys due or any other material breach of the contract, summary proceedings under MCL 600.5726 may be appropriate. Default alone is not forfeiture; notice of intent to forfeit is necessary. Sparling v Bert, 1 Mich App 167, 171 (1965).

Purchasers of real property by land contract “generally do not willingly surrender possession or forfeit their equity[,]” and most sellers of real property by land contract seek payment not possession. Gruskin v Fisher, 405 Mich 51, 63 (1979). If a vendee does agree to forfeit his or her equity and return possession of the property to the vendor in response to a vendor’s notice of forfeiture, “[the vendor] is then required to decide whether to accept possession or to seek a deficiency judgment.” Id. at 59-60, 64.

Unless the parties have a written agreement for a longer time, a vendee or person holding possession under him or her has 15 days from the date he or she was served with a notice of forfeiture to pay the moneys required under the contract and to cure any material breaches, or to surrender possession of the property. MCL 600.5728(1).

Under MCL 600.5728(2), a notice of forfeiture must:

•state the names of the contracting parties,

•state the date the contract was executed,

•provide the address of the premises (or a legal description),

•specify the amount of money required to be paid under the contract that remains unpaid,

•specify the dates on which the unpaid payments were due,

•indicate whether any other material breaches of the contract occurred, and

•declare the contract forfeited no less than 15 after the notice was served, unless the amount of money owed is paid and any other material breaches are cured within that time.

The person entitled to possession of the premises, or his or her attorney or agent, must sign and date the notice of forfeiture. MCL 600.5728(2).

According to MCL 600.5730, the notice of forfeiture may be served on the vendee or the person in possession of the premises under the vendee by any of the following methods:

•personal delivery,

•delivery on the premises “to a member of [the vendee’s] family or household or an employee, of suitable age and discretion, with a request that it be delivered to the vendee or person holding possession under him [or her],” or

•first-class mail addressed to the vendee’s last known address (or the last known address of the person holding possession under the vendee).

If service is made by first-class mail, the date of service “is the next regular day for delivery of mail after the day when it was mailed.” MCL 600.5730.

If notice of forfeiture cannot be served by personal delivery, delivery on the premises, or first-class mail, MCL 600.5730 allows for service by publication subject to MCL 554.301 and MCL 554.302. Service by publication of the notice of forfeiture is appropriate when the vendee or other person entitled to notice is absent from Michigan or cannot be located in Michigan, or when the person’s whereabouts “cannot be determined after diligent search and inquiry[.]” MCL 554.301. Service by publication requires that the notice be published at weekly intervals on three successive occasions in a newspaper published and circulating in the county where the property is located. Id. If there is no newspaper in the county, publication should be made “in some newspaper published in an adjoining county and circulating in the county where such property is situated.” Id.

When service is made by publication, the date of service is the date of the third publication. MCL 600.5730. Proof of service by publication “may be shown by the introduction of due proof of such publication[.]” MCL 554.302. The court may require further proof showing that service by publication was justified by the circumstances existing at the time. Id.

“[A]ccepting partial payments after service of the notice of intention to declare a forfeiture and before the time allowed in the notice to cure the delinquency had expired . . . cannot constitute a waiver by the vendor of his [or her] right to declare a forfeiture. Indeed, the vendor is obligated to accept payments toward the balance due until the grace period set out in the notice of intention runs out.” Reinecke v Sheehy, 47 Mich App 250, 257 (1973).