Posted by Dave on March 23, 2004 at 14:35:00:
Hi All
I will keep everyone apprised of what happens so everyone will know how the CS lease option stands up in California court.
Seems pretty solid from what my lawyer has told me. I used the lease option straight out of the book, but you never know what a judge will do when you stand before him.
What ever happens, we all will have an answer.
Dave
CS Lease Option Going to Court - Posted by Dave
Posted by Dave on March 23, 2004 at 24:42:15:
Hi All
Well I was just called by the owner of the house we purchased under a CS lease option. We notified her that we were exercising the option and now 17 days later we have been informed that she has retained an attorney and I must direct all questions through him.
Yes, I had taken the CS option agreement to a local (San Diego)attorney and was told that it was valid, so now I must retain him to see if it will be enforced in court.
Anyone else ever had to do this?
Re: CS Lease Option Going to Court - Posted by Julius Levai
Posted by Julius Levai on March 31, 2004 at 18:18:27:
Hello ! This is a perfect example of why the straight lease option is becoming a dinosaur. These stories abound (where the optionor changes its mind because of unexpected increased values and the un- expected exercise of the option). The safest possible way to effect the same result as a “lease option” is to eliminate the option altogether but retain the same end-result. The agreementis that upon the termination of the land trust in whose trustee the title is vested, the tenant beneficiary has the right to buy the property at full fair market value, minus any monies owed to it (due to the acquiring beneficiary party) by the trust at the time of purchase. Therefore no option, no due on sale violation, no unilateral changing of anyone’s mind…and no transfer of equitable interest (trust beneficiaries hold only an equitable interest in the land trust… none in the real estate). The way this is done is to have the would-be optionor place the property into a third-party trustee land trust, than have the optionee made a beneficiary in the trust for, say a 10% beneficiary interest (the minimum allowed by the IRS for a beneficiary taking income tax deductions); next have that co-beneficiary lease the property from the trust on a straight lease (triple net). By doing it this way, the would-be optionee will not only have the right to buy the trust property at a later date for whatever concessions the would-be optionor is willing to make, but they also have the right to take the income tax deductions for mortgage interest and property tax along the way (IRC 163(h)4(D). And, since the 3rd party trustee the true owner of the property is directed only by unanimous direction of the co-beneficiaries, and all payments are made to a 3rd-party collection agency, neither beneficiary can create a problem that can harm the other relative to either parties liens, lawsuits, creditor claims, probate or bankruptcy (even IRS tax liens against either party). Regarding the 90% interest still held by the grantor, that is agreed to be relinquished all or in part to the co-beneficiary upon that party’s exercise of its right to purchase (at the end of the trust and lease agreement). This system is called the Equity Holding Trust Transfer by North American Realty Services Inc. i California (PACTrust and NEHTrust) and is singularly the best idea ever (?) to hit creative real estate financing. And stories like yours abound wherein the EHT has saved the day… Its a real shame that every time its mentioned, discussed here… a group of not-so-creative-people try to destroy it… Julius Levai.
Re: CS Lease Option Going to Court - Posted by kawikaCA
Posted by kawikaCA on March 23, 2004 at 19:00:11:
I haven’t used CS’s L/O but I’m also in San Diego so do please post/email your outcome and I wish the best.
Re: CS Lease Option Going to Court - Posted by jeff
Posted by jeff on March 23, 2004 at 14:09:27:
I have never done a lease option, but I am interested in the out come. John Reeds web site listed some court cases on lease options and land contracts a while back, but I am not sure if they are still there. Good luck and please post the outcome. A lot of people use lease options