insurance question in an Agreement For Sale (Land Contract)

[Nate T.]

This might be a bit of an arcane question, but what better place than BP? :)

I had a fire recently at a house that was sold through an Agreement For Sale (aka land contract, contract for deed, contract for conveyance). We are the sellers and have legal title, the buyer has equitable title through the Agreement For Sale.

I was planning to take the insurance money and fix up the house, but the tenant/buyer mentioned that she might prefer to apply the money to her loan with us, and then take the fire damaged house as-is.

That is an option that we would consider, but I was just wondering what if we don't come to an agreement? If we want to use the insurance money to fix up the house, but she wants us to apply it to her loan, does she have any right to make that decision? I would think since we have legal title, and we made the insurance claim, we would have the right to make the decision. The Agreement For Sale doesn't seem to address this question directly.