Q: A bought land from B. Payments are $1,000 per year until the sale price is paid off. At his option A can make greater payments. B has now sold his remaining interest in the land. Does A have to pay B in a lump sum or is it legal for A to continue to pay B $1,000 a year?
A: Both A and B have rights in the property and can sell their interests to someone else. If the vendor B sells his interest to C, he does so subject to the agreement to A. Thus C buys the land subject to the agreement. C steps into B’s shoes and has the right to collect the payments from A.
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Similarly, A can sell his interest under the agreement, though often a purchaser such as A can only sell with the approval of the vendor. This provision is for the protection of the vendor who wants to ensure that he will get paid and obviously doesn’t want someone taking over the agreement who doesn’t have the financial ability to continue making payments.
A common term found in an agreement for sale states that if the vendor dies or sells his interest, the executor or new buyer will stand in his place and be entitled to collect monies owing under the agreement. Often there is a clause that speaks of the “approved assigns of the purchaser.” This means that before the purchaser, A, can sell his interest under the agreement the vendor must approve.
In some agreements, there may also be a clause that if the purchaser, A, sells his interest to D, A can still be liable if D fails to make the necessary payments. Alternatively, the agreement may state that if A decides to sell his interest, B, the vendor, has the right to demand that the full purchase price be paid to him within a certain number of days.
Obviously, each agreement needs to be looked at to determine the rights of the parties.
There is nothing in law that prevents parties from changing their agreement. A and B can agree to change the payment schedule. A and C, who has purchased B’s interest, can also agree to new terms. Perhaps C will offer a discount of the total price if A pays off the price immediately or makes larger payments.
I do hope that A has registered a caveat or instrument (in Saskatchewan) to protect his interest under the agreement for sale. A vendor who buys land is not bound by any unregistered interests such as agreements for sale unless he is proven to be deliberately trying to defraud the purchaser under the agreement.
Don Purich is a former practising lawyer who is now involved in publishing, teaching and writing about legal issues. His columns are intended as general advice only. Individuals are encouraged to seek other opinions and/or personal counsel when dealing with legal matters.
