Can a Mississippi city's rental-property ordinance reach landlords who use contracts for deed to dodge tenant-licensing rules?

Plain-English summary

Crystal Springs, a code charter Mississippi municipality, has a rental-property ordinance: landlords renting to third parties must hold a license, and the city can inspect under defined conditions. The ordinance is modeled on the City of Madison's, but with different warrant rules to avoid the constitutional flaw in the Madison ordinance that the Mississippi Supreme Court identified in Crook v. City of Madison, 168 So. 3d 930 (Miss. 2015) (the Madison ordinance allowed warrants on terms of the rental agreement instead of probable cause).

The practical problem driving the city's question: some landlords in Crystal Springs have started using installment sales contracts and contracts for deed instead of leases. The landlord still holds the deed. The occupant is making "purchase" payments. Functionally, the occupant is a tenant. But because the paperwork says "sale," the landlord argues the rental ordinance does not reach them.

The city asked whether it could amend the ordinance to cover this dodge. The AG said yes, but with a critical condition: the city has to determine, case by case, whether the agreement is in fact rental in nature. The label on the contract does not control. The Mississippi Court of Appeals in Crook v. City of Madison, 168 So. 3d 1169, 1180 (Miss. Ct. App. 2014), already faced a similar attempt: option-to-purchase contracts that the parties' own testimony showed were rental in nature. The appellate court allowed Madison to regulate the property as rental, regardless of the contract label.

The AG explained that Mississippi statutes give municipalities broad authority to regulate. § 21-17-5 lets municipalities adopt ordinances on municipal affairs that are not inconsistent with other law. § 21-19-1 authorizes regulations to secure general health and abate nuisances. § 21-19-15 authorizes preservation of good order, peace, and prevention of injury to property. These together cover rental-property regulation in service of community well-being.

So Crystal Springs may amend its ordinance to capture installment sales contracts and contracts for deed when, on the facts, those agreements function as rentals. The city's governing authorities make the factual call. If a particular agreement is genuinely a sale (the buyer is paying down equity, accepting risks of ownership, on track to receive title), there is no authority to regulate it under the rental ordinance.

The AG's footnote about the Madison case is important. The Mississippi Supreme Court reversed the Court of Appeals on a different ground (the inspection warrant provision was facially unconstitutional because it permitted warrants on lesser-than-probable-cause showing through the rental agreement). Crystal Springs' new warrant requirements were specifically designed to fix that problem. The opinion flags this without ruling on whether Crystal Springs' specific warrant language passes muster.

What this means for you

If you are a city attorney drafting or amending a rental-property ordinance

You can extend the ordinance to reach installment sales contracts and contracts for deed when those instruments function as rentals. The amendment language should focus on the substantive nature of the relationship, not on the label of the contract. Standard factors that signal "rental in nature" include: occupant pays a recurring amount that resembles market rent rather than principal-plus-interest amortization to title; landlord retains insurance, tax, and maintenance responsibilities a typical seller would not; occupant has no equity build-up or limited equity; agreement is short-term or terminable for default like a lease; deed transfer at end is contingent and rarely consummated.

Build a fact-finding mechanism into the ordinance: an administrative determination by the building official or a designated officer, with written findings, notice to the property owner, and a right to administrative appeal. Owners are entitled to due process before the city subjects their property to rental regulation.

For the warrant provisions, do the constitutional analysis from Crook (Miss. 2015) carefully. Inspection warrants must be supported by probable cause as the term is defined for administrative searches under Camara v. Municipal Court, 387 U.S. 523 (1967). A blanket waiver in the rental agreement does not satisfy the standard.

If you are a Mississippi landlord using contracts for deed or installment sales contracts

If your contracts function as disguised rentals, the city can reach them under an amended ordinance. The label on your contract is not the controlling fact. The functional analysis the city will apply looks at: whether the occupant is paying down toward title or paying for use; whether the occupant has any equity build-up; whether the occupant assumes the risks and burdens of ownership (taxes, insurance, structural repairs, etc.); whether the agreement is structured for an actual deed transfer at the end.

If your contracts are genuine sales (occupant is purchasing, building equity, accepting ownership risks, with title transfer at the end), the city has no authority to regulate them as rentals. Document the genuine sale features. If you are using these instruments specifically to evade rental regulation, expect the city's classification to follow function over form.

If you are an occupant under a contract for deed in a Mississippi city

Your legal status depends on the substance of the agreement, not just the title at the top of the page. If the agreement is genuinely a contract for deed, you have rights and remedies different from a tenant: you may be building equity, you have stronger rights to keep the property if you cure a default, but you also bear ownership risks (taxes, insurance, maintenance) that a tenant does not. Foreclosure and eviction processes differ.

If the city determines your agreement is rental in nature, you may benefit from rental regulations (habitability inspections, license requirements, tenant protections) that did not previously apply. That can be a positive. Talk to a housing lawyer if your situation is unclear.

The MS Real Estate Contracts and Closings treatise (cited by the AG) describes contracts for deed as conveying possession to the buyer but not the deed; the deed is delivered only after the buyer completes installment payments totaling the sale price. If your "contract for deed" never contemplates a deed transfer, that is a strong signal it is functionally a rental.

If you are a housing inspector or city building official

Build the rental-classification process into your work. When you encounter a property that the owner claims is held under a contract for deed but functions as rental, document the indicators (no equity build-up, owner-paid taxes and insurance, short-term or terminable, never structured for actual transfer). Make written findings. Provide notice to the owner.

Coordinate with the city attorney on the warrant procedure. Crystal Springs amended the warrant provisions specifically to address the Crook (Miss. 2015) constitutional flaw. Whatever process your city uses, ensure inspection warrants rest on probable cause as defined for administrative searches, not on rental-agreement waivers.

If you are a real estate or housing attorney

The Crook case line is the doctrinal hook. The Court of Appeals decision (168 So. 3d 1169) on the option-to-purchase question was not disturbed by the Supreme Court reversal (which addressed the warrant issue). So Crook is good law for the proposition that contract labels do not control: the actual nature of the relationship, established by testimony and contract terms, decides the regulatory question.

For clients structuring sales transactions, document the genuine-sale features clearly. For clients structuring rentals dressed as sales, expect the structure to fail in court if litigated.

Common questions

Q: What is a contract for deed?
A: An installment sales contract where the seller retains the deed until the buyer completes payments. The buyer takes possession but does not get title until the full purchase price is paid. They are common for owner financing of residential real estate.

Q: How is a contract for deed different from a lease?
A: A genuine contract for deed transfers ownership eventually; a lease never does. The buyer typically pays principal and interest over a fixed term ending with title transfer; a lessee pays for use without acquiring equity. Property tax, insurance, and maintenance obligations typically transfer to the buyer in a contract for deed; they remain with the landlord in a lease.

Q: Can the city regulate every contract for deed?
A: No. Only those that, on the facts, function as rentals. A genuine contract for deed (with real equity build-up and an actual planned title transfer) is outside the rental ordinance.

Q: Who decides whether a particular agreement is rental in nature?
A: The city's governing authorities (or a designated official) decide as a factual matter. The owner is entitled to due process before that determination subjects the property to rental regulation. A reviewing court will examine whether the determination is supported by substantial evidence.

Q: What if the city rules the agreement is rental, but the owner disagrees?
A: The owner can challenge the determination through whatever administrative appeal the ordinance provides, and ultimately in court. The Crook (Miss. Ct. App. 2014) decision turned on the parties' own testimony at trial; expect the factual record to be the focus.

Q: Does this opinion address Crystal Springs' specific warrant provisions?
A: No. The AG flagged that Crystal Springs amended its warrant rules to avoid the constitutional flaw in the Madison ordinance, but did not opine on whether the new warrant rules pass muster. That is a question for litigation.

Q: Can a city regulate vacation rentals or short-term rentals using this same authority?
A: That is a separate question that turns on the same statutory authority but with additional considerations. Several Mississippi opinions and cases have addressed short-term rental regulation. Get specific advice for short-term rental ordinances.

Q: What about MS HB 1718 / SB 2280 (real estate licensing protections)?
A: Those statutes deal with licensure of real estate professionals, not municipal regulation of rental property. Not implicated here.

Background and statutory framework

Mississippi statutes give municipalities a broad regulatory toolkit. § 21-17-5 grants the general authority to adopt ordinances on municipal affairs not inconsistent with state law. § 21-19-1 authorizes regulations for general health and to abate nuisances. § 21-19-15 authorizes preservation of good order, peace, and prevention of injury to property.

Code charter municipalities (Crystal Springs is one) operate under § 21-17-1 and related code charter provisions. Their regulatory powers are coextensive with the general municipal regulatory authority unless restricted by their charter.

The Crook v. City of Madison line is the controlling case authority. The Court of Appeals decision (168 So. 3d 1169 (Miss. Ct. App. 2014)) addressed the option-to-purchase / disguised-rental question. The Supreme Court (168 So. 3d 930 (Miss. 2015)) reversed on the inspection warrant issue, finding the Madison ordinance facially unconstitutional because it permitted warrants based on the rental agreement's terms instead of probable cause. The Court of Appeals' analysis on the disguised-rental question survived.

§ 7-5-25 limits the AG to questions of state law and excludes factual determinations from official opinions. The factual question here (whether a particular contract for deed is rental in nature) is for the municipality, not the AG.

Citations

• Miss. Code Ann. § 7-5-25 (limits on AG opinion authority)
• Miss. Code Ann. § 21-17-5 (general municipal ordinance authority)
• Miss. Code Ann. § 21-19-1 (health and nuisance regulation)
• Miss. Code Ann. § 21-19-15 (good order, peace, property preservation)
• Crook v. City of Madison, 168 So. 3d 1169 (Miss. Ct. App. 2014) (option-to-purchase contract may be regulated as rental on factual showing)
• Crook v. City of Madison, 168 So. 3d 930 (Miss. 2015) (Madison rental inspection warrant provision facially unconstitutional)
• MS Real Estate Contracts and Closings § 1:5 (2d ed.) (definition of contract for deed)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/01/B.Campbell-January-19-2023-Municipal-Regulation-of-Residential-Property.pdf

Original opinion text

January 19, 2023
Brock Campbell, Esq.
Attorney, City of Crystal Springs
Post Office Box 473
Crystal Springs, Mississippi 39059
Re:

Municipal Regulation of Residential Property

Dear Mr. Campbell:
The Office of the Attorney General has received your request for an official opinion.
Background
Crystal Springs, a code charter municipality, enacted an ordinance regulating rental property and
establishing licensing requirements for landlords who are renting property to third parties. The
City's ordinance is similar to the one upheld in Crook v. City of Madison, 168 So. 3d 1169 (Miss.
2014) rev'd, 168 So. 3d 930 (Miss. 2015) but with different warrant requirements.1 The City is
encountering landlords who are using installment sales contracts or contracts for deed to evade the
requirements of the rental property regulation. Ownership remains in the landlord's name.
Question Presented
May the City of Crystal Springs amend its ordinance regulating rental property to include
regulation of property where ownership remains in the landlord's name but a contract for deed or
installment sales contract has been entered into with a third party?
Brief Response
Pursuant to a municipality's authority to adopt ordinances with respect to municipal affairs, we
find no statutory prohibition against a municipality continuing to regulate property where a
landlord ultimately owns a piece of real property but enters into an installment sales contract or
1

Because it amounted to a lesser standard than probable cause, the Mississippi Supreme Court struck down
the inspection provision of Madison's ordinance as facially unconstitutional because it allowed a warrant to be
obtained by the terms of the rental license, lease, or rental agreement. See Crook v. City of Madison, 168 So. 3d 930
(Miss. 2015).

contract for deed with a third party if the city determines that the agreement remains rental in
nature. Whether a certain agreement may be regulated as a rental agreement is a factual
determination to be made by the governing authorities on a case-by-case basis. Where a
municipality does not find that a contract for deed or installment sales contract is in fact rental in
nature, we find no authority for a municipality to regulate the same.
Applicable Law and Discussion
Mississippi Code Annotated Section 7-5-25 authorizes this office to opine on questions of law
only and does not authorize factual determinations by official opinion. Your question ultimately
turns on a factual determination to be made by the governing authorities on a case-by-case basis.
We offer the following for general guidance.
As an initial matter, we understand that a contract for deed and installment sales contract are the
same thing—a contract conveying possession of the property to the buyer but not the deed. MS
Real Estate Contracts and Closings § 1:5 (2d ed.). "The deed is delivered only when the buyer has
finished making a series of periodic installment payments totaling the sale price." Id.
Section 21-17-5 of the Mississippi Code grants municipalities general authority to adopt
ordinances, and amend the same, with respect to municipal affairs so long as such ordinances are
not inconsistent with the state constitution and other statutory provisions. Section 21-19-1
authorizes municipal governing authorities to make regulations to secure the general health of the
municipality and prevent, remove, and abate nuisances. Further, Section 21-19-15 grants
municipal governing authorities the power to preserve good order and peace of the municipality
and to prevent injury to, destruction of, or interference with public or private property. A
municipality is permitted to both adopt and amend an otherwise lawful ordinance and carry out its
regulatory authority with respect to rental properties. Whether residential property governed by an
installment sales contract or contract for deed between a landlord and third party is actually a rental
contract is a fact question to be decided on a case-by-case basis.
The Court of Appeals in Crook v. City of Madison found that even where a landlord and tenants
had entered into option-to-purchase contracts, which were alleged attempts to disguise rental
relationships, the testimony of the parties to the contract proved the agreement to be rental in
nature; therefore, the option-to-purchase did not change whether the City could regulate the
property. Crook v. City of Madison, 168 So. 3d 1169, 1180 (Miss. Ct. App. 2014), rev'd 168 So.
3d 930 (Miss. 2015) (See supra note 1).
Consistent with the court's determination, it is our opinion that where an installment sales contract
or contract for deed between a landlord and an individual for a piece of property is ultimately
found to be rental in nature, a municipality may regulate such property in accordance with a
lawfully enacted ordinance. However, if a contract for deed or installment sales contract is not
ultimately determined to be rental in nature, the municipality may not regulate such property.

If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By:

/s/ Abigail C. Overby
Abigail C. Overby
Special Assistant Attorney General