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  1. #1

    Default Rescission of Contract

    My question involves real estate located in the State of: Colorado

    UCCC 1635 states:
    ... that the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures require under this chapter, whichever is later, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so.
    Can an obligor (borrower) rescind a land installment contract for property, outside the three day restriction, if disclosures for an escrow account pursant to 38-35-126 were never recievedand an account was never setup, there by never invoking the 3 day restriction?

    Would failure to disclose under the UCCC and failure to comply with 38-35-126 be two seperate issues or are they one in the same?

    [38-35-126. Contract for deed - escrow of tax moneys - written notice.]
    (1)
    (a) Parties entering into a contract for deed to real property shall designate the public trustee of the county where the real property is located to act as escrow agent for moneys paid or to be paid by the purchaser to meet the property tax obligations on the real property, including the seller's credit at closing for the current year's property taxes and periodic property tax payments, which the contract shall provide will be made monthly by the purchaser to the public trustee. The purchaser shall be responsible for payment to the public trustee of the escrow fee pursuant to section 38-37-104 (1) (d). Once each year during the month of April, upon notice from the county treasurer, the public trustee shall, to the extent funds are on deposit in the escrow account, transfer sufficient funds from the escrow account to the county treasurer for payment of property taxes on the real property for the prior taxable year. The public trustee shall continue as escrow agent for tax moneys collected on the real property until the deed to the real property is delivered to the purchaser and recorded. At the time of delivery, the public trustee shall release to the purchaser any moneys remaining in the escrow account and the receipts for all property taxes paid on the property by the public trustee. If the public trustee determines that the escrow is no longer necessary, the public trustee may terminate the escrow account. The public trustee shall notify the county treasurer of the termination and shall transfer any moneys held in escrow to the county treasurer for payment of property taxes in accordance with section 39-10-104.5, C.R.S. Any amount so transferred by the public trustee shall be subtracted from the amount of property tax payable on the real property at the time annual property taxes for the current or subsequent taxable years are due. Upon termination of the escrow account, any amount not accepted by the county treasurer upon transfer shall be returned by the public trustee to the person holding title to the real property that is the subject of the contract for deed to real property.

    (b) For the purposes of this section, a "contract for deed to real property" means a contract for the sale of real property which provides that the purchaser shall assume possession of the real property and the rights and responsibilities of ownership of the real property but that the deed to such real property will not be delivered to the purchaser for at least one hundred eighty days following the latest execution date on the contract for deed to real property and not until the purchaser has met certain conditions such as payment of the full contract price or a specified portion thereof. "Contract for deed to real property" includes installment land contracts.

    (c) The public trustee shall deposit tax moneys received pursuant to the provisions of paragraph (a) of this subsection (1) in an escrow account opened for such purpose in one or more financial institutions which are in compliance with and qualified and defined in article 10.5 of title 11, C.R.S. Moneys from more than one transaction may be commingled in one account, to be accounted for separately. If the escrow account opened by the public trustee under the provisions of this subsection (1) bears interest, such interest shall be retained by the public trustee to defray expenses arising from the administration of such escrow account.

    (d) A public trustee may designate an alternate to act as escrow agent on any contract for deed to real property in which the public trustee is designated as escrow agent pursuant to the provisions of this section; except that such alternate shall not be a party to the contract for deed to real property. Such designation shall be made by sending written notification of such designation to the parties to such contract and to the county treasurer. Such notice shall include the name and legal address of the designated alternate and the date such designated alternate shall assume the duties of escrow agent. Such designated alternate shall have all of the duties and powers of the public trustee to act as escrow agent on a contract for deed to real property as stated in this section. In the event that the public trustee designates an alternate to serve as escrow agent, the purchaser shall pay to the designated alternate the escrow fee as stated in paragraph (a) of this subsection (1).
    (2) Within ninety days of executing and delivering a contract for deed to real property, the seller shall file with the county treasurer of the county wherein the real property is located a written notice of transfer by contract for deed to real property. Such notice shall not operate to convey title. Such notice shall include the name and legal address of the seller, the name and legal address of the purchaser, a legal description of the real property, the date upon which the contract for deed to real property was executed and delivered, and the date or conditions upon which the deed to the real property will be delivered to the purchaser, absent default. In addition, within ninety days of executing and delivering the contract for deed to real property, the seller shall file a real estate transfer declaration with the county assessor of the county wherein the property is located, pursuant to the provisions of section 39-14-102, C.R.S.

    (3) The buyer shall have the option of voiding any contract for deed to real property which fails to designate the public trustee as escrow agent for deposit of property tax moneys or for which no written notice is filed with the county treasurer's office or the county assessor's office. Upon voidance of such contract, the buyer shall be entitled to the return of all payments made on the contract, with statutory interest as defined in section 5-12-102, C.R.S., and reasonable attorney fees and costs. This avoidance right shall expire on the date seven years after the latest execution date on the contract for deed to real property unless exercised prior to such date.

  2. #2
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    Default Re: Rescission of Contract

    While a state statute could allude to a federal statute or a violation of other laws that could include a violation of federal law, absent such a reference or incorporation you're dealing with separate statutes from separate jurisdictions.

    TILA applies to loans, not to sales. I am thus skeptical that you can find authority applying TILA to a sale under a land contract. Are you aware of any such authority?

  3. #3

    Default Re: Rescission of Contract

    Quote Quoting Mr. Knowitall
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    TILA applies to loans, not to sales. I am thus skeptical that you can find authority applying TILA to a sale under a land contract. Are you aware of any such authority?
    As the land contract involves payments to the seller, over a period of time, through seller financing, would that not be a loan for real property?

  4. #4
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    Default Re: Rescission of Contract

    no. that is not a loan. That is a purchase with scheduled payments. A loan is when a person borrows money. There is no money borrowed with a land contract.

  5. #5

    Default Re: Rescission of Contract

    Quote Quoting jk
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    no. that is not a loan. That is a purchase with scheduled payments. A loan is when a person borrows money. There is no money borrowed with a land contract.
    Yes, but based on the following, wouldn't TILA regulations apply? Since the statute for 38-35-126 is seven years as stated in the last line of section 3, would the buyer be able to enforce TIL regulations?

    Section 5-5-203 Consumer's right to rescind certain transactions.
    In the case of a consumer credit transaction with respect to which a security interest is
    retained or acquired in any property that is used as the principal dwelling of the person to
    whom credit is extended, the consumer shall have the same right to rescind the
    transaction as provided in the federal "Truth in Lending Act" and regulations thereunder.
    In order to comply with this code, a creditor shall comply with those provisions on the
    right of rescission of certain transactions.

  6. #6
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    Default Re: Rescission of Contract

    Any installment contract for goods or service would be similar.

    In a contract for deed, where the buyer takes immediate possession of the property, such as a residence, wherein the seller retains title until the completion of payments, an "equitable title" is obtained by the buyer in many state jurisdictions. In others, and equitable right to perform under the contract is held.

    My point, is that the seller has loaned the equivalent of money, in the same sense that a merchant loans money when selling a product under sales contract.

    There is an agreement, consideration, terms, interest paid on a principal balance.

    Here is a Texas case: Norton v. Norton, Tex: Court of Appeals, 7th Dist. 2010

    The main problem is usually those who buy under a contract for deed do not have the same protections due to elements of termination and forfeiture clauses, which do not exist in deed of trust/mortgages.

  7. #7
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    Default Re: Rescission of Contract

    Norton v Norton is a memorandum opinion dealing with the division of property in a divorce. To say it has nothing to do with TILA would be an understatement.

    A security interest is not created or retained in a land contract sale of real estate. The land contract vendor retains legal title, and conveys equitable title.

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