Posted by JPiper on October 23, 1998 at 11:44:43:
Sounds like you?ve got a variety of issues running through your mind, and I?m at a disadvantage because I can?t see your paperwork. But here?s a few thoughts.
First, an option to buy real estate is clearly an interest in the real estate. Secondly, if you used Bronchick?s form for a buyer the chances are high that you have equitable title, an interest in real estate. In fact, in many states to remove an equitable interest in property could require the filing of a quit claim deed. The terms ?owner-broker? is required to disclose an ownership interest to ?protect? the public. Whether stating ?owner-broker? as a license disclosure requirement somehow requires a certain type of ownership interest is an interesting question?..one which I suspect no one can answer for you, perhaps not even an attorney, and particularly not your tenant buyer?s attorney.
I think a more important matter is the heightened requirement that licensees are under to disclose material facts. In your original post you said you had a disclosure statement concerning the ownership?.which I don?t have the benefit of reading. I also don?t have the benefit of knowing how you set this deal up to begin with. In other words, since you don?t have a deed there are certain issues that COULD happen that would make delivery of the title to your buyer either impractical or impossible. On the other hand if you recorded a performance mortgage at the time you might have all these potential issues under control. Depending on how you had structured your lease/purchase with the original seller would have dictated how you should have made disclosure of material facts concerning the transaction. At a minimum I would have had a clause that stated that the transaction with the tenant/buyer was subject to my obtaining title from the original owner.
Do these disclosures or others present a problem to a prospective tenant/buyer?? They should?.but in my experience they don?t. My typical tenant/buyer has tended to be somewhat unsophisticated in real estate matters, in addition to not having many other alternatives in terms of acquiring a property. These emotional aspects of their situation often overrule the potential realties of the risks of delivering title. My attitude has been that this is a situation that I don?t take advantage of. Therefore I make sure I have mitigated the risks of these situations BEFORE I will sell it to a tenant/buyer.
One of the somewhat typical problems in a l/o is that when the tenant/buyer decides not to pursue the transaction further, sometimes he wants his money back, eventhough the contract states that the option consideration is non-refundable. As far as I?m concerned I?m not open to threats etc regarding this. I?m willing to live up to my part of the bargain, and I expect him to live up to his. You don?t say here whether the tenant is in default at this point, but if he is, I would act accordingly. I might also find a Realtor willing to list the property. You may have to educate the Realtor that there is no problem in delivering the deed (if in fact this is the case). You do have an option, the exercise of which will give you the deed to deliver to the next buyer. I might attempt to strike a deal with your tenant that you will sell the house, and give him his rightful portion of the proceeds according to the contract.
As to your fear regarding the real estate commission, have an attorney review the paperwork to see if you are in violation of anything in your state real estate act. I don?t think the real estate commission is necessarily something to fear if you have presented the material facts in your disclosure. One thing for sure though, a report to the real estate commission is often the first threat made to a Realtor?.and one that is amazingly effective. As long as you have your ducks in a row, it?s not something I would personally fear.
By the way, I think disclosure is an important consideration for anyone who is doing a transaction of any type. It?s important to look down the road to the day when a dispute comes up, and how your paperwork will appear in court.