Opinion ID: 1395295
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Heading: Application of the SLSA

Text: The SLSA applies to any subdivision in which any of the lots are sold by a land sales installment contract. Code § 55-337(5)(a). The Act defines a land sales installment contract as: any installment contract for the sale or disposition of land whereby the purchaser does not receive a deed conveying the property purchased until part or all installment payments have been made as called for in the contract and record title to said property remains in another pending full performance of the contract. Code § 55-337(11). Relying on the dictionary definition of installment and on the remedial nature of the SLSA, the trial court concluded that the Act applied to any contract which provided for payment of the purchase price in more than one payment. Because each of the contracts in this case provided for an initial payment at the time the contract for sale was executed and one or more subsequent payments for the balance of the purchase price, the trial court concluded that the contracts were installment contracts. Thus, the trial court held that the subdivision was subject to the SLSA. We disagree with this analysis, however, because it does not consider the entire definition of land sales installment contract and expands the coverage of the SLSA to land sales which do not share the potential for abuse which the General Assembly sought to remedy with the legislation. The definition of land sales installment contract requires more than the use of installment payments. The definition also requires that record title to said property remains in another pending full performance of the contract. Code § 55-337(11). The phrase record title is not defined in the SLSA. In the context of ownership of land, however, record title is generally used to describe ownership of a particular parcel of real property by the person in whose name title appears in the official deed records, in contrast to one who claims ownership through unrecorded documents. BLACK'S LAW DICTIONARY 1274 (6th ed. 1990). The person with record title is the owner of the property with the power to encumber or transfer it. [4] Applying these considerations to the five contracts relevant here, we conclude that the SLSA does not apply to High Knob. [5] Each contract provided for an initial payment ranging from $100 to $1,500 to be made at the time the contract for sale was signed. The contracts also required HKI to execute a general warranty deed to the purchasers within 30 days of the date that the sales contract was executed. In each case, HKI executed a general warranty deed and it was recorded, generally on the day of settlement or closing. In the Cockrell, Kauffman, Peterson, and Lawson transactions, the buyers agreed to pay HKI the remainder of the purchase price in a series of 96 monthly installments beginning 30 days after settlement or closing on the lot sales. These contracts provided that the indebtedness was to be evidenced by promissory notes, secured by deeds of trust on the respective lots. In these transactions, record title was transferred to each of the purchasers long before they completed performance on the sales contracts. Accordingly, these contracts do not come within the definition of a land sales installment contract contained in the SLSA and cannot be the basis for bringing the subdivision within the SLSA. The final contract, the Douglas contract, was, with one exception, identical to the preceding four. The sole difference was that, after paying the initial deposit of $100 when the contract was signed, the remainder of the purchase price was paid to HKI in a single lump sum payment rather than in a series of installment payments. The deed was recorded on the same date the lump sum payment was made, in this case only 15 days after the first payment was made and the contract for sale was executed. Under the trial court's interpretation of the statutory definition, the Douglas transaction qualifies as a land sales installment contract because it involved two payments. However, we decline to adopt the trial court's rationale and conclusion. To extend the definition of land sales installment contract to the two-payment Douglas transaction provides no remedy for the abuses sought to be addressed by the SLSA and strains the meaning of installment by applying it to a transaction comprised of only a deposit and subsequent payment in full. This is not the type of land sales contract which prompted the passage of the SLSA. The SLSA was enacted following a study and report issued pursuant to a 1977 Joint Resolution of the General Assembly. In the study commission's report, land sales installment contracts were described as purchase contracts which at best, ... provide the purchaser only with an equitable interest in the land during the period prior to transfer of title. Real Estate Commission, Report on Recreational Land Development to the Governor and the General Assembly of Virginia, H.Doc. 5, Vol. II, at 6 (1978). The abuses accompanying this type of land purchase contract included committing the buyer to many obligations, including the payment obligation, but committing the seller only to providing a deed when all payments were made. In addition, the buyer's interest could be defeated by the developer's mortgagees or creditors and by mechanics and subcontractors and the liquidated damages clauses universally applicable in the event of the buyer's default allowed the developer to retain all sums paid by the purchaser as agreed upon liquidated damages. Id. Under such contracts, the purchaser might pay the developer for years, miss a single payment, and retain neither the land nor the value of his payments. [6] If, however, the buyer has record title, he is not subjected to the risks just described. If the buyer defaults, sale of the property may be forced by the beneficiary of a deed of trust or by enforcement of a judgment obtained against the buyer for the unpaid amounts. The buyer does not lose the land or the value of payments made, however, because any amount recovered above the unpaid balance of the indebtedness is credited to the buyer. Therefore, it is record title and the attendant attributes of ownership, not the use of installment payments, which distinguishes those land sales transactions which need the protection of the SLSA from those that do not. In the Douglas contract and others like it, the protection of the SLSA is not needed. The initial payment is for a relatively small amount, in this case $100. No other payments are made between the initial deposit and the final payment. Consequently, there is no opportunity to suffer the loss of the land or the value of the payments paid because of a default. Therefore, we hold that a land sales contract consisting solely of an initial down payment or deposit and a second final payment for the full purchase price is not a land sales installment contract as defined by the SLSA. Accordingly, we will reverse the judgment of the trial court holding that High Knob is subject to the SLSA. We next consider HKI's contention that the trial court erred in holding that the HUD Reports are incorporated into the Lawson and Douglas contracts, imposing enforceable contractual obligations on HKI.