Lease Option Purchases On Tax Lien/Deed Properties
Hey all,
I recently ran into a fellow investor that primarily deals in Tax Liens/Deeds. We were talking and a subject of Lease Options came up. He said that he was finalizing the deal sometime that week. But the strange part is that the property being L/O was a property he aquired at a tax sale and now has a tax deed on. Well we are in Alabama and we have a 3 year redemption period from the time a deed passes to a purchaser. He has 2 years of the redemption period left, and theL/O was to be a 3 year lease with the option being exercised only after the end of the last year of the lease. He said he told the tenant/buyer that the previous owners could come back but if so he would just put them in another house.
My question is: Is this even legal?
Does anyone on this forum deal in transactions like these and if so how are these done?
1. If fully disclosed it is entirely legal.
2. Promising to move the person to another place might not be good enough if someone asked a judge. It is not the same property. If the L/O buyer really understands and is comfortable then it would still be legal but a bit messy.
3. It is not a bad idea. I would think a better deal is to offer the L/O buyer their option money back so they have only paid rent in the mean time. This will likely work better in a dispute with a judge deciding. If they had a choice to take the money or go to a different property with a similar deal that might be best.
You just need to watch out when dealing with people on complex deals. They cam claim they did not understand and sometimes that is all it takes.
John
[addsig]
Hi,
If he fully disclosed the details as you have said, why wouldn't it be legal?
He's just renting it with an option to purchase it, AFTER he gets clear title.
I'll be curious as to what some of the pros here say.
Steve
I'd want my option documents to make clear that the option was subject to completion of the tax deed. the "put them in another house" idea sounds flaky to me (what if you don't have another house they like?) If i were the L/O buyer I'd want some part of my payments (plus the option fee) going into an escrow so that if the deal falls apart I get my money back.