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An Installment Real Estate Sales Agreement is a Lease until the buyer pays the purchase price

On Behalf of | May 19, 2016 | New Case Law |

evict no money

Taylor v. Nu Digital Marketing, 245 Cal.App.4th 283

The court found monthly payments to be “rent” and upon default in payment of these “interim payments”, before the purchase price is paid, re-characterized the installment sales agreement as lease and seller can bring unlawful detainer against buyer.

The parties signed a “Contract of Sale Residential Property,” by which plaintiffs agreed to sell to defendants a piece of property for $1.2 million, to be paid after 5 years. Meanwhile, the defendants were to make monthly payments to plaintiffs equal to the amount plaintiffs paid on their mortgage (referred to as “probationary installment payments”), which did not apply to the purchase price. Defendants were given immediate possession but if they failed to make timely payments of any probationary payments. The written agreement provided that plaintiffs could serve the “buyers” with a five day notice to quit if in default and they were to immediately vacate.

Defendants defaulted ten months later and plaintiffs filed an unlawful detainer complaint, alleging that the agreement created a tenancy, requesting possession of the property, unpaid back payments and forfeiture of the agreement. The trial court found the contract to be a lease and granted the requested relief. Defendants appealed, contending that unlawful detainer was not an appropriate form of action.

The court of appeal affirmed the judgment, holding that while unlawful detainer does not lie in installment contract situations, the absence of any down or interim payments on the purchase price set forth a 60–month lease, where the payments actually made entitled defendants only to continued possession, and were therefore rent, as in fact the parties subsequently characterized them. “… because defendant’s possession of the property was achieved through the landlord-tenant relationship, unlawful detainer was properly used by plaintiffs to regain possession.”

**While there was no record (transcript of the trial) the appellate court was also persuaded by emails referring to the monthly payments “as rent”. So remember, emails can be used as extrinsic evidence to explain an ambiguity! This Court even cited Parsons v. Bristol Development Co., supra, 62 Cal.2d at p. 865 for this issue.