Posted by Pat Gilbaugh on July 15, 2004 at 11:55:49:
I just completed a LO on my primary property.
I believe I can rent it out for 2 years without getting hit with Capital gains, but if I go to year 3 I will get hit.
Any suggestions as to how I should structure this?
Would greatly appreciate your comments as I trend in to new territory.
Thanks - Pat
Should I NOT sell on Lease Option in AZ? - Posted by Jack
Posted by Jack on July 11, 2004 at 19:18:23:
There was a very interesting conversation on the main board regarding the statutes in AZ and the way L/Os are interpreted by the court. To get a non-paying tenant/buyer out of your house, it looks like a judicial foreclosure is needed. The fellow who argued this point seems very credible. He even used your contracts, Bill, and still had to go through a judicial foreclosure.
I think I’m going to stay away from L/O in favor of selling on CFD. Last thing I need is a long drawn-out foreclosure.
Here’s the Thread:
http://www.creonline.com/wwwboard/messages/38106.html
Re: Should I NOT sell on Lease Option in AZ? - Posted by William Bronchick
Posted by William Bronchick on July 12, 2004 at 09:05:35:
Well, first I never quite believe stories I hear third hand. And,
judges often give “off handed” opionions, only to rule differently in
court when the actual facts are before him.
Having said that, it is possible a judge can rule that a tenant has
an equitable interest in a property if a number of factors are
present - large deposit, increase in value, repairs made by the
tenant, long rental history, in short if the tenant has EQUITY.
It is rarely the case that a defaulting tenant has sufficient equity
on a lease/option to make the argument. Furthermore, a
defaulting tenant rarely has the means to hire a lawyer to make
the argument.
Re: Should I NOT sell on Lease Option in AZ? - Posted by JohnBoy
Posted by JohnBoy on July 12, 2004 at 24:16:33:
The statues quoted in that thread pertains to secuity deposits, not a lease option pertaining to option consideration.
If you read the thread you will have also noticed based on the Judges conversation with this person is that the Judge contradicts himself on a law that he supposedly cowrote.
It would appear to me that if this case is true where he had to foreclose, then either he modified the contracts in a way that made it appear like a sale, or he represented himself without an attorney, or he had an attorney that did a poor job of arguing his case or a combination of those things.
Also note that he mentioned something about having to do with rent credits. I asked how much of a rent credit he gave and he never answered. He only stated it didn’t matter the amount of rent credit. If he gave large rent credits that could of caused the deal to be reclassified as a sale.
Over the years there have been a number of posts from investors saying they were challenged in court where the tenants tried claiming an equitable interest and the tenants lost. They all claimed to have used Bill’s contracts and this is spread over a number of states.
It’s one thing to use someone’s contracts and it’s another if you alter them in some way. It also comes down to how good of legal representation you have arguing your case. It also comes down to what side of the bed the Judge gets up on in the morning.
He also said this Judge won’t even hear any matters pertaining to title issues and will throw it right out of his court. So does that mean this investor was thrown out of court and took this Judges ruling to mean he had to foreclose and just went along with that process?
There is just to many things we don’t know about this particulat case to determine anything. The investor just gives a blanket statement saying he had to foreclose and he used Bill’s contracts without providing any facts pertaining to the case.
If you read his other posts it also appears he is a big fan of using the PACTrust and NEHTrust. Everytime someone supporting this method comes here to post they have bad things to say about using lease options.
Re: Should I NOT sell on Lease Option in AZ? - Posted by Jack
Posted by Jack on July 12, 2004 at 02:52:27:
Yes, I’ve done several L/O’s in Phoenix. However, I was also very aware of the statutes regarding Landlord Tenant laws, and knew I was treading on thin ice because I can’t “really” force all the maintenance on to the tenants without repurcussions.
I’ve had some of the same thoughts you mention. But when the judge that helped to write the statute speaks, I listen. There are some unique Arizona nuances to real estate investing…for example land trusts and landlord actions.
I’d like to hear Bronchick’s reply.