last update 8-16-2007

Louisiana's Bond for Deed--LRS 9:2941 et seq

As a general rule, Louisiana does not recognize a conditional sale contract. Such a sale would be one whereby the seller retains title to the property until the buyer has paid for it. Other states recognize such a sale. However, Louisiana does have a procedure, called a Bond for Deed, whereby we can utilize the advantages of a delayed transfer of ownership until the property is paid for in full or paid down to an agreed upon level.

The provisions for a Bond for Deed is found at LRS 9:2941, et seq. The bond for deed is defined as being a contract to sell real property, in which the purchase price is to be paid by the buyer to the seller in installments and in which the seller, after payments of a stipulated sum, agrees to deliver title to the buyer.

Many times a lease with an option to purchase takes on the characteristics of a bond for deed. In Bergeron vs Parker, 2007, the Court held that a lease with option was a bond for deed. Also see Byars v Gatlin 1st CIR 2000, 767 So2d 972, for a similar holding. That court also said that the only way to cancel a Bond for Deed is by using the 45 day notification process.

A bond for deed is not a sale itself and title is not transferred thereby, even when payment in full is made according to its terms. A separate act of transfer from the seller to the buyer is required.

Mortgaged Property

The La Supreme Court in Dec 2006 in Levine v. First Natl Bank of Commerce held that the buyer in a bond for deed agreement had sufficient interest in the contract that the due on sale clause was triggered.

In order to sell a mortgaged tract under a bond for deed, the law requires that the mortgage holder is to give a written guarantee to release the property from the mortgage at a stipulated mortgage release price. This agreement by the mortgage holder is to be recorded in the mortgage records of the Parish where the property is located before any part of the property is offered for sale under a bond for deed contract. This requirement also applies if a subsequent mortgage is placed on the property.

Required Escrow Agent

When there is an existing mortgage on the property, the bond for deed payments are to be made to some bank authorized to do business in Louisiana which shall be designated as the escrow agent for all of the parties. The payments shall be distributed by the escrow agent between the seller and the mortgage holder. in proportion between the balance of the mortgage and the balance owed to the seller. However, a court has ruled that the failure to so designate a bank as the escrow agent does not invalidate the contract. see St Landry Loan v Etienne 227 So2d 599, 3rd CIR 1969.

Default in Payments

If the buyer in the bond for deed contract fails to make the necessary payments, the seller, at his option, may have the bond for deed contract cancelled by proper registry in the conveyance records, provided he has first caused the escrow agent to serve notice upon the buyer that unless payment is made as provided within 45 days from the mailing of the notice, the bond for deed will be cancelled. If there is no mortgage holder, the seller is to follow the same procedure. Be sure that the 45 day notice is provided in accordance with LRS 9:2945. Without that notice, the buyer cannot be evicted and the contract cannot be terminated. Also see Thomas vs King, 813 So2d 1127 (La App 2 Cir 2002).

In Bertehlot v Le Investment 866 So 2d 877, 4th Cir 1/21/04,the Court held that the parties can agree that there can be other reasons for default than just non-payment, such as property maintineance requirements.

Forfeiture Provisions

A forfeiture provision in a Bond for Deed is not proper and was held to be null and void in Gray v James 503 So2d 598, 4Cir 1987 and allowed the buyer to be charged a fair rental value for his usage of the property to be offset by the payments that were actually made. Property Transfer Upon payment in full or of a stipulated amount, the seller is to transfer the title of the property to the buyer. But be careful if there is an existing mortgage that has a "due on sale" clause that requires the mortgage to be paid off if the property is transferred. In Levine vs First Natl Bank, 948 So2d 1051 (La 12/15/06), the La Supreme Court held that the bond for deed had transferred an interest in the property and, thus, triggered the due on sale clause.

Homestead Exemption

Prior law on homestead exemptions was confusting. The buyer in a bond for deed contract was considered to be the owner for purposes of the homestead exemption. At least that is what La Revised Statute 9:2949 that was enacted in 1995 appears to state. However, the La Attorney General has issued 3 opinions (95-393, 95-393A and 96-170) in 1995 and 1996 reviewing the status of exemptions. The AG determined that the statute is not sufficient for the issuance of an exemption and that in order for the homestead exemption to be valid, a constitutional amendment approved by the public is required.

My experience has been that some Assessors would grant the exemption while others will balk at it. If you individual parish Assessor would grant it, then you should have considered yourself to be lucky. I get the impression that more and more Assessors were refusing to grant it.

The Legislature clarified the rule in Act 929 of the 2004 Legislative Session by eliminating availability of a homestead exemption to those buying under a bond for deed by stating:


	"No homestead exemption shall be granted on bond for deed
	property.  However, any homestead exemption granted prior
	to June 20, 2003 on any property occupied upon the
	effective date of this Paragraph by a buyer under a bond
	for deed contract shall remain valid as long as the 
	circumstances giving rise to the exemtpion at the time 
	the exemption was granted remain applicable."


See La Law Review, 1971, vol 31, page 587 for a legal article on Bond for
Deed contracts.

Based on this new law in 2004, it appears that homestead exemption is simply not available to buyers under a bond for deed contract.


========================  WARNING  =======================
                      AND DISCLAIMER
This information is provided for the reader's benefit in
becoming familiar with the legal matters discussed.  Your
particular facts may be different from the points above.
You should not rely on the above data without consulting a 
attorney to discuss the specific facts of your case
and the law of your state.
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If you live in Louisiana and want to talk about your situation, please call me at the number below. Fees will be charged after initial consultation.

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last update 8-16-2007

Louisiana's Bond for Deed--LRS 9:2941 et seq

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