A North Dakota contract for deed is a seller-financed real estate agreement in which the buyer takes possession and pays the purchase price in installments directly to the seller, while the seller keeps legal title until the final payment clears. The arrangement is governed primarily by Chapter 32-18 of the North Dakota Century Code, which sets a mandatory cancellation process with cure periods running from six months to a full year.1Justia Law. North Dakota Century Code Title 32, Chapter 32-18 – Cancellation of Land Contracts For buyers, that means strong protection against a quick ejection after a missed payment. For sellers, it means the process of recovering the property takes far longer than most expect.
Writing and Recording the Contract
The contract must be in writing. North Dakota’s Statute of Frauds, at Section 9-06-04, makes any agreement for the sale of real property invalid unless it is written and signed by the party to be bound.2North Dakota Legislative Branch. North Dakota Century Code Chapter 9-06 – Contracts Invalid Unless in Writing Section 47-10-01 adds that an estate in real property can only be transferred by a written instrument signed by the seller or the seller’s authorized agent.3North Dakota Legislative Branch. North Dakota Century Code Title 47 Property 47-10-01 At a minimum, the document should spell out the purchase price, payment schedule, interest rate, and the consequences of default.
Recording the contract with the county recorder is not technically required, but skipping it is risky. Section 47-19-01 allows any instrument affecting title or possession to be recorded in the county where the property sits, and Section 47-19-41 provides that an unrecorded conveyance is void against a later good-faith purchaser who records first.4North Dakota Legislative Branch. North Dakota Century Code Chapter 47-19 – Record Title If the seller sells the same property to someone else who records a deed before you record the contract, you lose. The recorder will also require the name and address of whoever drafted the legal description before accepting the contract for recording.
Seller Disclosures Before Signing
For residential properties with four or fewer units, the seller must give the buyer a written property disclosure form before the purchase agreement is signed. The disclosure covers material facts the seller knows about that could significantly affect a typical buyer’s use of the property, including latent defects, environmental issues, structural problems, and mechanical system conditions. Sellers use the form established by the North Dakota Real Estate Commission or one substantially similar, completed in good faith based on actual knowledge.5North Dakota Legislative Branch. North Dakota Century Code Title 47 Property 47-10-02.1 – Property Disclosure Requirements Exceptions
The disclosure duty applies even when no real estate agent is involved, which is often the case with contracts for deed. Several categories of sales are exempt: court-ordered transfers, foreclosure sales, transfers between family members, and sales of newly constructed homes with no prior occupancy.5North Dakota Legislative Branch. North Dakota Century Code Title 47 Property 47-10-02.1 – Property Disclosure Requirements Exceptions
Who Is Responsible for What During the Contract
Once the contract is signed, the buyer holds equitable title and the seller retains legal title. The buyer gets the right to occupy and use the property as if they owned it. The seller’s name stays on the deed until the last payment clears, and the seller’s main duty is to deliver a clean deed at that point. Undisclosed liens or encumbrances on the property can expose the seller to legal claims.
Day-to-day responsibilities land on the buyer. These contracts typically require the buyer to pay property taxes, maintain insurance, and keep the property in reasonable condition.6Consumer Financial Protection Bureau. What Is a Contract for Deed? Falling behind on property taxes produces tax liens that complicate the eventual deed transfer. Letting insurance lapse can itself trigger a default.
Most contracts require the buyer to carry homeowners coverage for both property damage and liability, and to name the seller as an additional insured. That way the seller receives notice of lapses and has standing to file a claim if the property is damaged. Some sellers also require periodic proof of insurance or reserve the right to force-place coverage at the buyer’s expense if the policy lapses.
Default and Cancellation Under Chapter 32-18
This is where the law gives buyers substantially more protection than many people assume. A seller cannot simply declare the contract cancelled after a missed payment. Chapter 32-18 sets out a mandatory step-by-step process, and no contract language can waive it.
The Notice the Seller Must Serve
The seller must first serve a written notice of cancellation on the buyer. The notice has to identify the specific default, state that the contract will be cancelled, and give the effective date, which must comply with the cure periods below.1Justia Law. North Dakota Century Code Title 32, Chapter 32-18 – Cancellation of Land Contracts
Service is strict. The notice must be served the same way a summons would be served in a North Dakota district court when the buyer lives in the state. If the buyer lives out of state or cannot be found, the seller must publish the notice in a legal newspaper in the county where the property is located, once a week for three consecutive weeks.1Justia Law. North Dakota Century Code Title 32, Chapter 32-18 – Cancellation of Land Contracts Mailing a letter or taping a notice to the door does not satisfy the statute.
How Long the Buyer Has to Cure
Section 32-18-04 sets two tiers based on how much the buyer still owes at the date of the notice:
- Six months to cure if the amount still owed is more than two-thirds of the original purchase price.
- One year to cure in every other case, which covers any contract where the buyer has already paid down at least one-third of the original price.
There is a floor underneath those tiers: the cure period cannot be less than one year unless the property is three acres or smaller.1Justia Law. North Dakota Century Code Title 32, Chapter 32-18 – Cancellation of Land Contracts A seller trying to recover a quarter-section of farmland from a buyer who has barely started paying will still wait at least twelve months. No contract provision can shorten these periods; the statute applies regardless of anything the contract says to the contrary.
What Happens If the Buyer Does Not Cure
If the buyer fails to cure within the statutory period, the contract terminates and cannot be reinstated by a later offer to pay. The seller records the cancellation with the county recorder by filing a copy of the notice, an affidavit of service, and an affidavit stating that the default was not cured in time.1Justia Law. North Dakota Century Code Title 32, Chapter 32-18 – Cancellation of Land Contracts The buyer loses equitable title and, absent separate legal action, forfeits all payments made to that point. That forfeiture risk is one of the largest downsides of buying on a contract for deed compared to a conventional mortgage, where any surplus from a foreclosure sale above the loan balance goes back to the borrower.
The Buyer’s Options Once Notice Arrives
A buyer facing cancellation has two main avenues. Curing the default within the statutory period reinstates the contract. Beyond that, Section 32-18-06 lets the buyer ask a court for an injunction blocking the cancellation if the buyer can show a valid legal counterclaim or defense against the amount the seller claims is due.1Justia Law. North Dakota Century Code Title 32, Chapter 32-18 – Cancellation of Land Contracts A seller can also bypass Chapter 32-18 altogether by filing a lawsuit in court to terminate the contract, in which case the chapter’s notice and cure requirements do not apply.
Tax Treatment for Buyers and Sellers
Buyers holding equitable interest are generally responsible for property taxes from the time the contract is signed. Letting those taxes slip creates liens that threaten the eventual clean deed.
Sellers report income from a contract for deed using the IRS installment sale method. Instead of reporting the entire gain in the year of sale, the seller counts as income only the portion of each payment that represents profit, spreading the tax liability over the life of the contract. The IRS requires sellers to file Form 6252 in the year of sale and in each later year payments are received.7Internal Revenue Service. Topic No. 705, Installment Sales
One trap for sellers: the contract must charge an adequate interest rate. If the stated rate is too low, the IRS will impute interest at the applicable federal rate, reclassifying part of what the seller treated as principal as interest income instead. For most seller-financed sales of $7,296,700 or less, the test rate is capped at 9% compounded semiannually; for certain land transfers between related parties, the cap drops to 6%.8Internal Revenue Service. Publication 537 – Installment Sales Charging zero or nominal interest does not avoid the rule; it just changes the classification on the seller’s return.
North Dakota does not impose a real estate transfer tax, so the eventual deed transfer at the end of the contract will not trigger a state-level transfer tax.9Tax Foundation. 2026 State Tax Competitiveness Index – North Dakota