Key Takeaways

  • Articles of agreement outline critical business terms such as ownership, duties, and contract provisions.
  • In real estate, an "article of agreement" often refers to installment contracts or land contracts used when traditional financing isn’t possible.
  • These agreements define rights and obligations for buyers and sellers, including payment structure, default consequences, and title transfer.
  • Real estate purchase agreements include contingencies, disclosures, and legal obligations that protect both parties.
  • The term can also encompass related contracts like lease-to-own agreements or contracts for deed.

Articles of agreement are the foundational documents of a business entity. With these documents, a business will outline members' voting rights, limitations of the company, and entity powers.

What Are Articles of Agreement?

When forming a business entity, you will need a wide range of documents, including articles of agreements. Articles of agreements are most commonly used by non-profit organizations, and they serve a very similar purpose to articles of incorporation.

There are several important pieces of information that should be included in articles of agreement:

  • Purpose of the entity.
  • A list of members.
  • A list of capital owned by the entity.
  • A description of how the entity will be managed and operated.
  • Amendments and provisions.

Typically, articles of agreement will be related to either personal estate or real estate. Articles are best understood as a part of an agreement and can either be a minute or a memorandum. Generally, an article will be in writing, and it will be used to modify or dispose of a piece of property. When used in relation to property, an article, or instrument, the agreement should cover a variety of information:

  • The identification of the involved parties.
  • The subject of the contract.
  • The terms to which the parties in the contract have agreed.
  • The effective date of the contract.
  • Signatures from all parties involved.

When covering the contract's subject matter, it is crucial that you use language that is easily understood by all. You will also need to list a specific time and location for the contract to be completed. For instance, if the contract is related to the delivery of goods, you would need to specify when and where they are to be delivered and which party is responsible for the delivery expense.

The agreement must also clearly state the responsibilities of each and every party of the contract. Failure to define the duties of the parties may make it difficult for them to uphold their obligation. The date of the instrument should be accurate. The signature of every party, or the signature of each party's agents, needs to be included.

If an agent's signature is used, the authority of the agent will need to be included. The agent should sign their client's name as well as their own. When a person plans to buy a piece of real estate, they will usually first pay a down payment, and then pay the rest of the money that they owe upon settlement.

In some cases, however, the buyer isn't able to cover the down payment, whether it's because they don't have the money or are unable to obtain a loan. Despite the lack of a down payment, the seller may still wish to sell their property to the buyer, and they can do so by using an installment sale agreement.

With an install sale agreement, a down payment will not be needed. Instead, the buyer would make a month's property payment in advance. After this initial payment, the buyer will make their normal monthly payments as outlined in the agreement. If there is a default, most install sale agreements can be converted to a lease, meaning the monthly payments will be treated as rent instead of payments towards ownership of the property.

Therefore, if a buyer misses a payment, which would count as a default, they could be evicted from the property. To gain ownership of the property's title, the buyer should make sure that they are making his required payments on time and in the proper amount.

In addition to having the ability to evict buyers for defaulting on the agreement, sellers may also have the right for sue the buyer for the money owed.

Article of Agreement in Real Estate

An article of agreement in real estate typically refers to a formal contract between a buyer and seller outlining the terms of a property sale. It is frequently used in place of traditional mortgages and is known by several names, including installment contract, contract for deed, or land contract​.

This type of agreement allows the buyer to take possession of the property and make payments over time, but legal title remains with the seller until the full purchase price is paid. Common features of a real estate article of agreement include:

  • Installment payments: The buyer agrees to pay the purchase price in periodic payments, often with interest.
  • Possession and use: Buyers typically gain immediate possession and responsibility for taxes, insurance, and maintenance.
  • Title transfer conditions: Title does not transfer to the buyer until the final payment is made.
  • Default terms: If the buyer defaults, the seller may retain all payments as liquidated damages and reclaim possession. Some agreements convert to leases in case of default, allowing eviction​.

These agreements are especially useful when buyers cannot secure conventional financing, as they provide an alternative path to homeownership.

Key Terms in Real Estate Articles of Agreement

A well-drafted article of agreement in real estate will include several essential clauses to define the rights and responsibilities of both parties:

  • Property description: A legal description of the real estate involved.
  • Purchase price and terms: Total price, down payment (if any), interest rate, and installment schedule.
  • Contingencies: Provisions allowing parties to back out under specific conditions (e.g., financing approval, home inspection).
  • Closing date and possession: When and how the buyer will take control of the property.
  • Disclosures: Seller’s legal obligation to disclose known issues with the property.
  • Default remedies: Procedures and consequences for missed payments, including eviction or forfeiture of interest​.

Buyers and sellers should review these clauses carefully, as real estate agreements can affect financial and legal standing for years.

Real Estate Article of Agreement vs. Purchase Agreement

While an article of agreement in real estate and a purchase agreement may seem similar, they serve different purposes depending on the structure of the transaction:

  • A purchase agreement is commonly used in conventional real estate sales, where the buyer obtains financing and full title transfers at closing.
  • An article of agreement, or installment contract, is used when the buyer makes payments over time, with the seller holding title until full payment is made​​.

Both contracts define the terms of sale, but installment-based articles of agreement offer sellers more security and buyers more flexible financing.

Articles of Incorporation vs. Operating Agreement

Depending on the structure of a corporation, the company may be required to create certain documents. The purpose of these legal documents is to describe information about the corporation. This information can include a description of how the corporation will be operated or the corporation's purpose. These documents are commonly referred to as articles of incorporation.

Operating agreements are similar to articles of incorporation but are used by limited liability companies instead of corporation. Both types of documents will be used in a similar manner, and will usually need to be filed with the state for the entity to be valid.

Importance of Legal Review in Real Estate Agreements

Given the long-term financial and legal consequences of a real estate article of agreement, it is highly recommended that both parties consult with an attorney. Legal counsel can help ensure that:

  • All provisions comply with state real estate laws.
  • The buyer’s rights are protected regarding equitable title.
  • Default and foreclosure procedures are clearly outlined and legally enforceable.
  • Disclosures and due diligence are properly completed.

A well-reviewed article of agreement minimizes the risk of disputes and protects all parties involved.

Frequently Asked Questions

  • What is an article of agreement in real estate?
    It’s a contract, often called a land contract or installment agreement, where the buyer makes payments over time and the seller retains title until fully paid.
  • Is an article of agreement legally binding?
    Yes. As long as it includes all required elements—offer, acceptance, consideration, and signatures—it is enforceable in court.
  • What happens if a buyer defaults on a real estate article of agreement?
    The seller may retain previous payments, reclaim possession of the property, and possibly convert the contract to a lease to facilitate eviction.
  • How is an article of agreement different from a mortgage?
    A mortgage involves immediate title transfer with a bank loan. An article of agreement delays title transfer until the full price is paid, with the seller acting as the lender.
  • Can I sell a property with an article of agreement in place?
    Only if permitted by the contract terms and local law. Sellers often retain the right, but must honor the agreement’s provisions.

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