Lease Is Up But Buyer Can't Buy
We had a 2 yr LO that expired the end of October. The buyer was unable to qualify for a mortgage.
She mailed us a letter saying she thought from here on out that we could:
a) continue the lease til 8/06 (not sure why she picked that date)
b) seller-finance w/ 9% interest
c) terminate the lease and refund her security deposit and down payment
We were (are) newbies to LO and we were in a pinch. We wanted out of the home and she needed a place to set up a daycare. We thought a LO was a win/win because we were out of the house payments and she got a place she otherwise wouldn't have been able to get. In those 2 years she has consistently been late on payments and has trashed the house.
The last thing we will consider is seller-financing the house to her. She has proven to be bad at managing money and taking care of the property.
We are entertaining two options at the moment and I wanted to get some input from others.
Option 1 is to rewrite the lease and extend the option to purchase. This time, however, we will write in stiff penalties for late payments (we were very lax with this in the past). I would want to make it conditional on the buyer working with us and with a loan officer in making sure she will qualify in two-years to be able to actually purchase the house. I'm not sure why she didn't qualify this time around and I'm not sure what kinds of documents I should request from her as proof she *did* try to qualify. If anyone knows and could tell me it would help me tremendously.
The second option we are considering is terminating the lease and letting our friend buy the house from us for what we owe. We take a financial loss this way but at least we don't have to take any further risk on the home.
Our lease was poorly written (obviously) and I'm not sure if the wording on it indicates she should get her down payment back if she is in default. Here is the wording, let me know how you would interpret it.
"Purchase option. It is agreed that Lessee shall have the option to purchase real estate known as (address) for the purchase price of (amount) with a down payment of (security deposit plus $200 per month accumulated by Lessor from the $1200 monthly rent payment) payable upon exercise of said purchase option, and with a closing date no later than 30 days thereafter. This purchase option must be exercised in wirting no later than October 31, 2004 but shall not be effective should the Lessee be in default under any terms of this lease or upon any termination of this lease.
I think technically she is in default for several reasons. She never paid rent on time. Not once. She had another person on the lease that she kicked out 1 month before the lease expired. That was done without my consent.
If she is in default is it assumed that she forfeits the down payment money? I'm not sure that it is clearly written in the lease agreement though it was a verbal agreement at the start of all of this.
Sorry this is so long. I look forward to hearing back any input from this group.
If she has not made any pmts on time, for God's sake man don't sell the place to her....
I would evict her and KEEP her option fee. That's the rules. You don't have to return it if it was a true LO.
Your lease wording is FINE. As stated is is an OPTION fee, and gets applied to the DNPMT IF she buys. If she doesn't buy...so what. Let her take it to a judge. I doubt if she'll fight it that far. But in any case, you're right in keeping it.
Now if things get hostile and bitter, you may be better off refunding a portion of the option price when she hads you the keys and she is fully moved out.
Anyway, you said she didn't take care of the place, how much in repairs do you have to do? She may end up owing you more money anyways.
Just some thoughts...
Sam
She probably picke 8/06 so that she could take to court the fact that she has been in the property for over three years and now has equity. I would, get an attorney if neccessary, draft a letter stating that since she couldn't perform in excersising the option, the lease is now over and converts to a month to month tenancy. I would further reinforce that any monies she gave to you were option deposits and that her failure to excerise that option as spelled out in the original agreement, entitles her to nothing. Furthermore, I would give her the proper 30 days notice that you will not be renewing the lease and that you want her out of the property by whatever legal date it would be in your state. Then state that if she does not comply you will initiate eviction proceedings and she will be held responsible for any and all damages. Realize that you will have a hard time collecting that judgement, especially given the fact that she is self employed.
Good Luck,
Shawn(OH)
I agree with samedwin and loanwizard. Get her out of there which loanwizard has eluded to may take a little time depending on your state's eviction law. While you are evicting her you will be able to determine how much it will take to rehab the property and then make the decision that you fell best about as far as alleviating yourself from this property.
Dave
[addsig]
Why not get this person out of the property and work with one of the investors on this website. I'm sure that there are plenty of investors here that would be able make a win-win situation for you.
Good luck,
Andre Abreu