Land contracts are one of the oldest ways to buy and sell a home in Ohio without a bank. They can open the door to ownership for buyers who cannot qualify for a mortgage, and they can give sellers a steady stream of income and a wider pool of buyers. They also come with a specific set of statutory rules that many buyers and sellers never read. Ohio regulates these deals in Chapter 5313 of the Revised Code, and getting the details wrong can cost either side a great deal. Here is a plain-English overview.
What is a land contract?
Ohio law calls it a “land installment contract.” Under R.C. 5313.01, it is an agreement that by its terms is not required to be fully performed within one year, under which the seller (the “vendor”) agrees to convey title to Ohio real property to the buyer (the “vendee”), and the buyer agrees to pay the purchase price in installments. The seller keeps legal title as security until the price is paid. Option contracts to buy real estate are not land installment contracts.
Chapter 5313 defines “property” as Ohio real estate improved by a dwelling. In practice, that means the statute’s protections are aimed at land contracts for homes and other property with a dwelling on it. Deals involving vacant land or purely commercial property raise different questions, and the contract terms themselves matter even more there.
Why buyers and sellers use them
- Buyers may be able to buy a home while they rebuild credit, establish income history or save toward refinancing, often with a smaller down payment than a lender would require.
- Sellers can reach buyers who cannot get traditional financing, earn interest on the balance and spread out the sale over time.
- Both sides can negotiate terms such as price, interest rate, payment schedule and a date for a final balloon payment directly, without a lender’s underwriting rules.
The tradeoff is that the buyer does not receive the deed until the contract is paid off, and the seller remains the owner of record for years. That arrangement only works well when the paperwork is done right.
What Ohio requires in the contract
R.C. 5313.02 lists minimum terms every land installment contract must contain. Among them:
- The full names and current mailing addresses of the parties, and the date each party signed.
- A legal description of the property.
- The contract price, any separate charges or fees, the down payment and the principal balance owed.
- The amount and due date of each installment, and the interest rate on the unpaid balance with the method of computing it.
- A statement of any encumbrances (such as an existing mortgage) and any pending order of a public agency against the property.
- A requirement that the seller deliver a general warranty deed when the contract is completed, or another available deed if the seller legally cannot give a general warranty deed.
- A provision that the seller provide evidence of title according to local custom.
- A provision that if the seller defaults on a mortgage on the property, the buyer can pay that mortgage and receive credit on the land contract.
- A provision that the seller will record the contract, and a requirement that the buyer pay taxes, assessments and other charges from the date of the contract unless the parties agree otherwise.
The contract must be signed in duplicate with a copy to each side, and it must be executed with the same formalities Ohio requires for deeds and mortgages. If the contract uses a metes and bounds description, the county engineer must review and approve it.
Recording within 20 days
Within twenty days after both parties sign, the seller must record a copy of the contract with the county recorder and deliver a copy to the county auditor (R.C. 5313.02(C)). Recording puts the world on notice of the buyer’s interest, which helps protect the buyer if the seller later tries to sell or borrow against the property.
Limits on the seller’s mortgages
A seller may not hold a mortgage on the property greater than the balance due under the land contract, with a narrow exception for blanket mortgages covering other property where the seller gives written disclosure of the mortgage amount and any release price. A seller also may not place a new mortgage on the property for more than the contract balance without the buyer’s consent.
Annual statements
Under R.C. 5313.03, the seller must give the buyer a statement at least once a year, or on the buyer’s request (but no more than twice a year), showing the amounts credited to principal and interest and the balance due. A land contract passbook from the seller or a financial institution satisfies this requirement.
What happens if the buyer defaults
This is where Ohio’s statute matters most, and where many do-it-yourself contracts go wrong.
The 30-day cure period and 10-day notice
When a buyer misses a payment, the seller cannot enforce a forfeiture until thirty days after the default. During that window, the buyer can stop the forfeiture by paying everything currently due plus any fees or charges owed under the contract (R.C. 5313.05). After the 30 days, the seller must serve a written notice that identifies the contract and property, specifies what the buyer has not done, and tells the buyer the contract will be forfeited unless the buyer performs within ten days (R.C. 5313.06).
Forfeiture or foreclosure: the five-year and 20% lines
Which remedy the seller can use depends on how far along the buyer is:
- If the buyer has paid under the contract for five years or more from the first payment, or has paid 20% or more of the purchase price, the seller can recover the property only through a judicial foreclosure and sale (R.C. 5313.07). The seller is entitled to sale proceeds up to the unpaid contract balance.
- If the contract has been in effect for less than five years and the buyer has not reached the 20% mark, the seller may bring a forfeiture and restitution action under the eviction statutes in R.C. Chapter 1923 (R.C. 5313.08).
A seller who terminates the contract through either route generally cannot pursue further action on the contract, unless the buyer’s payments were less than the fair rental value plus damage caused by the buyer’s use, in which case the seller may recover that difference (R.C. 5313.10). A court judgment for the seller cancels the contract and is recorded with the county recorder.
For buyers, the takeaway is that years of payments and a meaningful equity stake bring real protections. For sellers, the takeaway is that “just evict them” is often not an option, and a missed procedural step can delay recovery of the property.
Common problems to watch for
- Contracts copied from online forms that omit required Chapter 5313 terms.
- Sellers who never record the contract, leaving the buyer’s interest invisible in the public record.
- Existing mortgages, liens or unpaid taxes the buyer does not know about.
- Unclear responsibility for taxes, insurance and repairs.
- Balloon payments the buyer cannot refinance when they come due.
- Sellers trying to remove a buyer through a standard eviction when foreclosure is required.
A title search before signing, a written plan for the balloon payment and a clear allocation of costs can prevent most of these issues.
Getting started
If you are thinking about buying or selling on a land contract, start by confirming the property’s title, any existing mortgage and the tax status. Agree on the price, interest rate, payment schedule and balloon date in writing, and make sure the contract includes every term Chapter 5313 requires. Then calendar the 20-day recording deadline and the annual statement. Both sides benefit from having the contract reviewed before anyone signs.
Vincent Esquire helps Ohio buyers, sellers and investors structure, document and enforce real estate transactions, including land contracts. Learn more about our real estate law services or reach out to talk through your situation.
This article is for general informational purposes only and is not legal advice. Reading it does not create an attorney-client relationship. Laws change and every situation is different, so consult an attorney about your specific circumstances. Attorney advertising.
