Identifying the objectives of the parties and thinking through how to best handle the worst-case scenarios and possibilities is vital in ensuring that the land contract will serve the interest of both the buyer and seller. While the courts may step in upon a default to override a harsh forfeiture clause, the parties can avoid a lot of this potential mess by taking time to understand the laws of their state for land contracts and to customize the land contract to meet both of their needs.
Of course, an essential component of a successful land contract situation is to do everything you can to not default on the contract. Regardless of how the state treats the forfeiture clause, a default pretty much opens a can of legal worms. You’ll be asked to explain how you followed the contract to the letter and why you deserve greater protection. Therefore, be sure to really think through the timeline and carefully and conservatively crunch the numbers of your farm operation before signing a land contract. A smart business plan and financial analysis can help you stay out of trouble and ensure that the land contract plays out to its full potential by providing you permanent tenure to your dream piece of farmland. This includes preparing a monthly cash flow analysis to help give you an accurate sense of whether you’ll have enough cash to make due on the payments year round, especially during the off season.