Is This A Valid Lease Option?
I had property for sale by owner or for rent. A couple called me and asked if I would consider a lease option. I said yes. I told them the price I wanted for the house and that for owner financing I wanted a 6 month rental history before they had the option to buy the house. When we got together to sign the lease, I was using a form lease, which didn't have anything about the option to purchase. They asked me to write the option on the contract, which I did. I wrote "6 months.. tenant can opt to purchase the property for $125,000 and that I would hold the note for up to one year at $1000 per month with 5% down." After one year they had to provide their own financing.
The tenants informed me a couple of months ago that they want to exercise their option to buy the house. They have already obtained outside financing. But the value of my property has increased and I want to raise the price. The tenants are opposed to me raising the price and say that I have to sell them the house at the price I wrote on the lease in the option. Are they right? Am I legally obligated to sell them the house for $125,000? I now want to sell the house for $135,000, but if I refuse to sell them the house for $125,000 can they sue me for breach of contract? 
Sorry to say, they are correct.
If you put in writing that you were giving them an option to buy the property at a set price and that that offer was good for 6 months, then they have 6 months to decide to buy at the price you agreed. In many cases, a down payment of the option is required to protect the seller if the tenants decided not to buy and you had it off the market that long.
A breech of contract is what they can sue you for and if I understand you explaination, they would win. Contracts are made so people are forced to keep thier word....
Sorry
And, if they sued you for "specific performance" the judge would likely enter a judgment against you for damages, including their attorneys' fees, AND order you to deed the RE to them as per your written agreement.
But, don't make any decision until a competent lawyer looks at the agreement to see IF it is a valid Option agreement that can be enforced...it might or might not be, depending on law and the exact wording you inserted in the form.
If I put myself in the buyers position and was dealing in good faith, I don't feel it would be fair to the buyers.
Especially, if they have done all you requested of them (payments on time, keeping the property up, etc.)
You are using a lease/option as an exit strategy here. You have calculated your payday and it sounds like you want even more! My advise to you is stop being greedy and just sell the house. You were comfortable with $125k before, it is still the same payday for you now.
I know it is hard to do when the property value goes up, but just stick to the origional plan and make your easy $X. You make your money when you buy, you simply collect when you sell.
It never does hurt to ask and the tenants say "no" so I'd say, "okay when can we close".
GOOD LUCK
Yes you have a L/O and you should honor your agreement That should apply even if it was only a verbal agreement..
Through the years, I have sold many houses at prices I wish I hadn't.
The only thing is that I gave my word and secondarily put it in writing. I always had a profit and retained my self respect.
You can't cheat an honest man, and honest men don't cheat others.[ Edited by sammyvegas on Date 01/11/2004 ]