Taylor v. Nu Digital Marketing, Inc.: When Is a Purchase Agreement Not a Purchase Agreement

california state seal

“The relationship created by the agreement must be characterized by reference to the rights and obligations of the parties and not by labels.”

The court in Taylor v. Nu Digital Marketing, Inc. affirmed the trial court, which waded through convoluted contract terms to find a landlord-tenant relationship in the midst of purchase-option contract.

When someone takes possession of a property under an option contract, as opposed to a standard lease or a purchase agreement, the usually bright line distinction becomes blurry: in either case, they are in possession. One significant difference is the remedy available upon default.

When a vendee on a purchase agreement defaults, the remedy of the seller to recover the property may be an action for ejectment. Ejectment, like most civil remedies, operates on a thirty-day summons, often taking a year or more to find a trial date. Unlawful detainers are considerably faster; the catch is that you must plead a cause of action for unlawful detainer, or you are not entitled to the summary remedy.

With about $15,000 in arrears, the plaintiff in Taylor was looking to recover the property quickly. Defendant resisted on the basis that it took possession pursuant to a purchase agreement, not a lease, and it could therefore not be dispossessed via an unlawful detainer.

The Third Appellate District looked through the labels to find that the “probationary installment payments” did not actually accrue to the down payment – the were just “rent”. Accordingly, it regarded the defendant as taking possession through a “lease” – default of which gave rise to a claim for unlawful detainer.