Land Contracts: A Creature of Michigan Real Estate Financing

Land contracts seem to be somewhat unique to Michigan. In some states land contracts are actually illegal. That said, a land contract is a pretty simple way to sell a property.  The land contract can be at once both the sales agreement and the mortgage. The parties to the contract need to agree on the basic terms. Purchase price, down payment, interest rate on the balance due, monthly payment, and maturity (balloon) date, are the salient terms.  Once those terms are agreed to, the land contract is signed and the deal is done. Typically, it is the seller who is responsible for providing title insurance to the buyer. The cost of title insurance is based upon the purchase price. The cost to record the land contract is a buyer cost. The attorney fees for document prep and closing are usually a split cost between buyer and seller. The buyer does not receive a deed to the property until the land contract is paid in full.
Many buyers prefer land contracts because it is a low cost way to obtain financing. Buyers with a questionable credit record require a land contract because they cannot obtain conventional third-party financing ( e.g. the bank) Sellers like them because it makes the sale of hard to sell property a bit easier.  To protect yourself you should make sure the down payment is at least 10% of the purchase price, preferably 15% to 20%.
While there are so-called standard form land contracts out there (you can find them on the internet), I do not use them. Every deal is different and the terms of the contract should reflect that uniqueness.  The down side of a land contract is that a buyer takes possession and then may default. It can take as long as a year to foreclose a land contract. During the foreclosure period, the buyer retains possession and use. The seller receives no payments during default. Additionally, the foreclosure process can cost as much as a $1,000 in attorney fees to complete. Hence the need for a solid down payment.
William Carey is highly experienced in representing lenders and land contract vendors in real estate financing issues.

The Relationship Between Zoning and Riparian Rights

R-1 Zoning and Riparian RightsImage

The enactment of a zoning ordinance is the primary method by which private land use is regulated.  Townships have long been authorized, through zoning and police power, to restrict the manner in which a private citizen may use his land.  Typically a township creates land use classifications such as residential, commercial and industrial.  Within each classification there are defined allowable uses to which certain land can be put to.

At Higgins Lake, both Lyon Township and Gerrish Township have sophisticated land use regulations.  As to the lakeshore of Higgins Lake, the vast majority of the parcels are designated as single family residential (“R-1”).  In general terms, an R-1 classification means that the use of the land is limited to a single family unit.  In contrast, for instance, an R-2 designation allows multiple family uses.

The courts of Michigan have ruled that local units of government may regulate riparian bottomlands through zoning (and police power) ordinances.  Because riparian ownership may not be severed from adjoining uplands, whatever zoning classification is placed on the upland is also applied to the adjacent riparian.  Accordingly, the vast majority of Higgins Lake bottomlands are restricted to R-1 usage.

What does the R-1 classification mean in terms of the use of your riparian property?  Two cases decided by the Michigan appellate courts are instructive.  In Soupal v Shadyview (Gerrish Township) the court ruled that 8 families using an R-1 parcel on Higgins Lake was a nuisance per se and violated R-1 restrictions.  In Kallman v Sunseekers, the court ruled that a limited liability company could not allow its multiple family members to all use an R-1 parcel.  Both of these cases can be read in their entirety by visiting

Notwithstanding R-1 restrictions a riparian owner has an absolute right to seasonally moor a boat and erect a dock.  Furthermore, zoning has not been historically used to prevent immediate family members from enjoying mooring privileges as well.

Beyond owners and immediate relatives, the practice of allowing nonriparians to seasonally moor boats on  R-1 riparian land violates township zoning rules and state statute. In most situations it is a violation of either the Lyon Township zoning ordinance or the Gerrish Township zoning ordinance to allow your nonriparian neighbors and friends to seasonally moor a boat on your riparian.  In most circumstances it is a violation of state law to do so as well.  This because the State of Michigan regulates the practice of allowing nonriparians to seasonally moor boats on private bottomlands by requiring the riparian owner to first obtain a marina operating permit from the Michigan Department of Environmental Quality.

Long recognized as an expert in the field, William Carey stands ready to represent you on all property issues.