SENATE BILL REPORT

ESB 6143

BYSenators Pullen, Talmadge and Nelson

Revising provisions on real estate contract forfeitures.

Senate Committee on Law & Justice

Senate Hearing Date(s):January 12, 1988; January 18, 1988

Majority Report:  Do pass.

      Signed by Senators McCaslin, Vice Chairman; Halsan, Hayner, Madsen, Nelson, Newhouse.

Senate Staff:Lidia Mori (786-7418)

                  February 18, 1988

AS PASSED SENATE, FEBRUARY 12, 1988

BACKGROUND:

The Real Estate Contract Forfeiture Act was enacted in 1985.  The intent of the drafting committee was to reevaluate the statute after it had been in use for one to two years.  A number of revisions, many of which are technical in nature, have been proposed by members of the bar and related professions.  All comments were considered during the reevaluation of the act.

The Real Estate Contract Forfeiture Act provides the only way by which a seller may forfeit a real estate contract.  In the event of a purchaser's default, attorneys' fees are permitted to be recovered to the extent prescribed in the contract.  Some concern has arisen regarding situations where people have sold property using a common preprinted form which provides for the recovery of attorneys' fees only if the seller chooses to bring suit.  Therefore, if the default is cured prior to initiating a lawsuit, the seller is unable to recover the costs expended in preparing to commence the forfeiture proceeding.

SUMMARY:

Technical corrections are made to the Real Estate Contract Forfeiture Act, and inconsistencies and ambiguities are removed.  The rights of contracting parties are clarified and a forfeiture remedy is created which is reasonably comparable to other methods of foreclosing real estate in Washington.  The forfeiture remedy provides the option of foreclosing a real estate contract judicially as if it were a mortgage.  A mechanism for the recovery of costs expended by the seller is provided when the purchaser defaults and later cures such default.  After the foreclosure proceeding is initiated, the defaulting purchaser may request a public sale of the property and the court may, under appropriate circumstances, require the purchaser to pay the entire debt owed to the seller.  The seller may need to bid the unpaid balance of the contract in order to avoid losing the property.  The seller has a right to obtain a deficiency judgment and the purchaser has a right of redemption under existing state law and precedent with respect to mortgages.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Senate Committee - Testified: David R. Rockwell, Chairman of the Real Estate Contract Forfeiture Act Revision Committee