A bond for deed in Louisiana is a contract to sell real property in installments: the buyer moves in and pays the price over time, and the seller delivers title only after the buyer has paid an agreed-upon amount.1Louisiana State Legislature. Louisiana Code 9:2941 – Bond for Deed Defined It fills a gap for buyers who can’t get a traditional mortgage right away, but the statutes governing it (Louisiana Revised Statutes 9:2941 through 9:2947) impose specific requirements on sellers, some of them backed by criminal penalties. If you’re on either side of one of these deals, the rules below are the ones that actually change outcomes.
What a Bond for Deed Actually Is
Under the statute, the buyer takes possession and pays in installments while the seller keeps legal title as security until the contract is satisfied. Think of it as closer to a long-term layaway on real estate than a mortgage: no deed transfers until the payments hit the number the contract set. Because Louisiana is a civil law state, the protections come from the Revised Statutes rather than from general equitable doctrines you might see cited in other states’ land-contract cases.
Record the Contract Right Away
The most important thing a buyer can do after signing is record the bond for deed in the parish mortgage and conveyance records. Once recorded, any later sale, lease, mortgage, lien, or judgment the seller takes against the property is subordinate to the buyer’s rights under the contract.2Justia Law. Louisiana Revised Statutes 9:2941.1 – Recordation, Subsequent Filings, Interest Prohibited, Cancellation of Mortgage Records Without recording, there is no public notice and no protection against a seller who secretly mortgages or resells the property.
The statute sets no deadline, which is exactly why buyers should insist on recording at signing. Every unrecorded day is a day of exposure to the seller’s other creditors. When the buyer eventually pays in full and receives a deed, any liens the seller placed on the property after the recording date can be cancelled: an interested party files an affidavit, gives the lienholder 30 days’ written notice, and the clerk cancels the lien if it isn’t voluntarily released.2Justia Law. Louisiana Revised Statutes 9:2941.1 – Recordation, Subsequent Filings, Interest Prohibited, Cancellation of Mortgage Records One carve-out: recording does not protect against tax sales.
When the Property Already Has a Mortgage
This is where the statute gets serious. Most of its teeth are aimed at protecting buyers who pay for years on a property the seller’s bank could otherwise foreclose out from under them.
A Recorded Release Guarantee From Every Lienholder
Before offering mortgaged property under a bond for deed, the seller must obtain a written guarantee from every mortgage holder and lienholder agreeing to release the property once the buyer pays a stated release price. That guarantee must be recorded in the parish mortgage records before the seller offers any part of the property for sale, and it also applies if the property becomes mortgaged after the contract is signed.3Justia Law. Louisiana Revised Statutes 9:2942 – Unlawful to Sell Encumbered Real Property by Bond for Deed Without Guarantee to Release on Payment A buyer should confirm this document exists and is recorded before making a first payment.
Payments Must Go Through a Louisiana Bank
When the property carries a mortgage or lien, every buyer payment has to run through a Louisiana-licensed bank designated as escrow agent for everyone in the deal. The bank splits each payment between the seller and the mortgage holder in proportion to the secured debt relative to the purchase price, so that when the buyer finishes paying, the mortgage is paid off and title can transfer clean.4Justia Law. Louisiana Revised Statutes 9:2943 – Method of Payment The escrow structure exists to prevent a seller from collecting installments while letting the underlying mortgage fall behind.
No Promissory Notes While the Property Is Encumbered
If the property has a mortgage or lien, the seller cannot require the buyer to sign promissory notes for the purchase price or any part of it. A seller can take back a mortgage note only after the buyer has paid enough to release the property from the existing mortgage and the deed is executed. If the property is unencumbered and notes were used, the seller must produce and cancel them when the final sale is passed before a notary.5Louisiana Office of Financial Institutions. Louisiana Revised Statutes Title 9 – Bond for Deed Contracts
Foreclosure Is Blocked While You’re Current
As long as the buyer stays current, no mortgage holder can foreclose. If the buyer defaults, foreclosure is limited to the specific lots or tracts in default, leaving current portions alone.5Louisiana Office of Financial Institutions. Louisiana Revised Statutes Title 9 – Bond for Deed Contracts That distinction matters in subdivision deals where one bond for deed covers multiple lots.
What Happens After a Missed Payment
A seller cannot cancel the contract the moment a payment is missed. The statute imposes a mandatory notice-and-cure process. The seller directs the escrow agent to send the buyer written notice by certified or registered mail, return receipt requested, to the buyer’s last known address. The notice must state that unless the buyer brings payments current within 45 days from the mailing date, the bond for deed will be cancelled.6Louisiana State Legislature. Louisiana Revised Statutes 9:2945 – Cancellation of Bond for Deed Upon Default
Cure within 45 days and the contract continues as if nothing happened. Miss the window and the seller records the cancellation in the conveyance records. This process applies whether the property is mortgaged or not.5Louisiana Office of Financial Institutions. Louisiana Revised Statutes Title 9 – Bond for Deed Contracts
The statute is silent on one question buyers care about most: what happens to the money already paid if the contract is cancelled. There is no statutory refund and no statutory forfeiture. That makes the contract’s own language critical. Negotiate, in writing, how prior payments are treated in a cancellation, because without a clause covering it, years of payments can simply be gone.
Criminal Penalties Sellers Should Know About
Two seller violations carry criminal exposure, not just civil consequences:
- Selling encumbered property by bond for deed without first obtaining and recording the written release guarantee from every mortgage or lien holder. Penalty: up to $1,000 in fines, up to six months in jail, or both.
- Requiring promissory notes for the purchase price when the property carries a mortgage or lien. Same penalty: up to $1,000, up to six months, or both.
Both rules exist because these are the moves that can wipe a buyer out. A buyer who signs promissory notes on encumbered property can end up personally liable on the notes even after losing the home to the seller’s mortgage holder.7Justia Law. Louisiana Revised Statutes 9:2947 – Penalty for Violations
The Homestead Exemption Is No Longer Available
Louisiana law used to let bond for deed buyers claim the homestead exemption on property they occupied under the contract, treating them as owners for that purpose. That provision, former Section 2948, was repealed in 2020.8Justia Law. Louisiana Revised Statutes 9:2948 – Repealed by Acts 2020 No 20 Buyers who qualified before June 20, 2003 and were already occupying the property when the initial restriction took effect in 2004 may still have a valid exemption, but no new exemptions can be granted on bond for deed property.
The effect is real money. The Louisiana homestead exemption shields up to $75,000 of a home’s assessed value from most property taxes. A bond for deed buyer today cannot access it until the deed transfers and the buyer becomes the legal owner, which raises the effective carrying cost compared to a traditional purchase.
Property Taxes and Income Tax
Because the seller holds title, property taxes are legally the seller’s obligation, but most bond for deed contracts shift the tax bill to the buyer by agreement. Read that clause carefully. Unpaid property taxes can trigger a tax sale, and a recorded bond for deed does not shield the property from a tax sale.2Justia Law. Louisiana Revised Statutes 9:2941.1 – Recordation, Subsequent Filings, Interest Prohibited, Cancellation of Mortgage Records
For sellers, installment payments are generally income for federal and state tax purposes. Section 453 of the Internal Revenue Code (the installment sale rules) may allow gain to be spread over the life of the contract instead of recognized entirely in the year of sale. Whether that treatment applies, and whether it’s the right choice, depends on the seller’s basis, entity type, and whether the seller elects out. A tax professional familiar with installment sales is worth the fee, because misreporting can bring penalties from both the IRS and the Louisiana Department of Revenue.
Before You Sign
If you’re buying, record the contract in the parish conveyance and mortgage records the day you sign. Confirm whether the property is mortgaged; if it is, ask to see the recorded release guarantee and the designation of a Louisiana-licensed bank as escrow agent before you pay anything. If either is missing on encumbered property, the seller is not just in breach, but committing a criminal offense.
If you’re selling mortgaged property, get the written release guarantee from every lienholder, record it, and designate a bank licensed through the Louisiana Office of Financial Institutions as escrow agent, all before signing. Skipping steps here is not a paperwork problem; it’s a criminal one.
Both sides should negotiate the terms the statute leaves open: how already-made payments are treated on cancellation, who pays property taxes and insurance, and who handles maintenance. The bond for deed statutes concentrate on mortgaged property and the cancellation process. Whatever the contract doesn’t spell out, the parties will have to fight about later with almost no statutory guidance to fall back on.