Posted by Elise on August 18, 2005 at 19:49:43:
That should be big, not bug,
and security, not sequrity.
I’m not illiterate; I just can’t type and talk on the telephone at the same time.
(Is there a way to edit a post once it has been posted?)
Lease Option question - Posted by Kevin (tn)
Posted by Kevin (tn) on August 18, 2005 at 10:38:14:
For those who do lease options when selling, do you collect a security deposit along with an option fee? I’m just wondering what I should put in my lease contract in the section concerning security deposit. My option agreement contract refers to the non-refundable option fee, but didn’t know if a security deposit was also to be collected.
Dexter Douglas - Posted by Nelson Carson
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Amelia Gregory - Posted by Garland Montgomery
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Re: Education is key - Posted by Ed Copp (OH)
Posted by Ed Copp (OH) on August 19, 2005 at 09:19:25:
No offense meant but if you do not understand what you need to do, don’t do anything until you get the proper knowledge.
Lawyers are notorious for not reading documents. Sometimes they become judges who do not read documents. That said be sure that you understand what you mean for your documents to say.
A lease/option is two different transactions combined. Why not just uncombine them. I like to use a lease as a seperate transaction. Collect a security deposit on the lease.
Then I like the option to be a seperate agreement altogether. I collect a consideration for the option. To me it seems wrong to call this consideration a fee. Lawyers and real estate brokers collect fees for their services, and they need licenses. I collect a consideration, usually money. For this consideration I sell you the right to buy the property for a certain time. I sold you something, and now you own the right to buy for a limited time. The consideration is not refundable.
Now by using two documents for the two transactions you protect yourself from judges (somewhat) who are not willing to read the documents.
I also like to have the documents have different dates on them. In other words I may lease on Monday, and sell you an option on Tuseday. If there is then any problem in the future it will first need to be determined which transaction contains the problem.
It is not prudent to rent or lease anything without a proper security deposit, Suppose that your new tenant stops paying, you need a deposit to help midigate your damages.
Re: Lease Option question - Posted by Elise
Posted by Elise on August 18, 2005 at 19:43:29:
Kevin, I agree with the others. They present good reasons for this.
Also, a friend of mine collects bug Non-Refundable Option Consideration fees up front on his lease options, but no security deposit. When he evicted one tenant over a dispute over maintenance, the judge said the option fee was in effect the security deposit and ordered him to refund 100% of this sequrity deposit to the tenant. He didn’t care that the option agreement said that the option consideration is non-refundable.
If rental agreement had a security deposit in it, maybe he would have still kept most of the NROC.
Re: Lease Option question - Posted by Brad Crouch
Posted by Brad Crouch on August 18, 2005 at 16:12:02:
Kevin,
What you DON’T want, is for some judge to rule that this lease option
transaction was in fact, a disguised sale.
Sellers do not collect a security deposit, but landlords do. You want to
be able to argue that YOU are a landlord.
Brad
Re: Lease Option question - Posted by Scott
Posted by Scott on August 18, 2005 at 10:45:52:
Personally I do collect a security deposit. What I do is if they exersize the option I take that off the final sale price. I also put it in writing for them.
Re: Lease Option question - Posted by Levi
Posted by Levi on August 18, 2005 at 10:42:08:
Yes, collect a security deposit as well. It looks more like a lease in court that way. You can credit it to the buyer if they buy the same as the option money. Also, if they decide to leave you can hang the deposit over their head to get them to clean, etc.