A contract for deed is a contract to give legal title to a buyer once a buyer has performed all of his obligations, which usually means once he has made all of his payments. Chapter 5 of The Texas Property Code has highly regulated contracts for deed. In certain situations, a seller/landlord cannot simply evict a tenant who has rights under a contract for deed. However, not all contracts for deed are regulated by Chapter 5. For example, our office still encounters contracts made before the relevant section was made effective. Additionally, non-homestead property may still not be regulated by Chapter 5, and the stringent regulations found in that chapter may not apply to investors. To speak to a real estate lawyer about an eviction matter call 713-979-2941, and ask for Hector Chavana Jr.
As a result, on more than one occasion in the past year, our office has dealt with evictions involving buyers under a contract for deed. A contract for deed may raise an “intertwined title issue.” Intertwined title means that a JP court is deprived of jurisdiction because issues of title MUST be resolved before adjudicating who has superior right to possess the property. Since a JP court does not have jurisdiction to hear title issues, it cannot hear eviction cases that have intertwined title. As a result, the terms of the contract are important, and a contract for deed might not be a one-way ticket out of JP court.
In Haith v Drake, 596 SW 2d., 194 (Tex App.-Houston [1st Dist.], 1980, the tenant entered into an oral lease on a property. Thereafter, he entered into a written contract for deed. The tenant argued that by mere virtue of having a contract for deed, a JP court was divested of jurisdiction for eviction. Under that theory, the tenant was granted an injunction by a superior court:
The order entered by the district court granting the injunction recites that the injunction is required “because there is a dispute of title between the parties, the cause of action for a forcible entry and/or detainer does not lie. Plaintiff does not have an adequate remedy at law and he will be irreparably injured if defendant is not enjoined during the pendency of this (breach of contract) suit.”
The appellate court disagreed.
It is Dr. Drake’s position that he is entitled to possession of the premises by reason of the contract of sale. He asserts that he has complied with every provision of the contract and has produced evidence in support of this contention. However, he has not completed the performance of his obligations under the contract. Mr. Haith is not required to convey legal title to Dr. Drake until the entire consideration has been paid.
The court went on to say that the tenant could not make an argument for title at all because he had not made all of his payments under the contract for deed at the time the case was filed. As a result, the tenant did not have equitable title. Therefore, there was no title dispute that would divest the JP court’s jurisdiction. The court mentioned that the tenant had equitable RIGHTS, but those rights were insufficient to raise a TITLE issue.
The court concluded that a landlord/tenant relationship had arisen, and that an eviction suit was proper:
Since the contract provides that a landlord-tenant relationship could arise by reason of the breach of the purchase contract, it appears that the justice court had jurisdiction of the subject matter. It also had acquired jurisdiction of the parties. Since an appeal to the county court has been perfected, that court has acquired jurisdiction of both the parties and the subject matter of the controversy. The fact that it might be necessary to introduce evidence of title in order to prove the landlord-tenant relationship does not deprive the county court of jurisdiction since the validity of the title so developed is not in issue.
Like any case, the facts matter. At times, in poorly drafted contracts for deed, the issue of possession is not addressed. To speak to a lawyer about an eviction matter call 713-979-2941, and ask for Hector Chavana Jr.
At times, the spouse of a person who holds a contract for deed may claim rights under it. When real property is acquired under a contract for deed or installment contract, the inception of title relates back to the time the contract was executed, not the time when legal title is conveyed. Riley v. Brown, 452 S.W.2d 548, 551 (Tex.Civ.App.—Tyler 1970, no writ). Thus, if one spouse entered into a contract for deed before marriage, the property is separate property even if the conveyance of legal title occurs during the marriage and the deed names both spouses as grantees. See Dawson v. Dawson, 767 S.W.2d 949, 951 (Tex.App.—Beaumont 1989, no writ).