Lease purchase vs. Lease w/seperat option

[-Tony- 0]

I understand L/P= lease and option to buy together but, which is better L/P or L/O and could you explain why?

 

Thanks Tony

[MichaelC 160]

Hi, Tony. I'm not sure I understand your question. Are you asking what the difference is between a lease purchase agreement and a lease with option to purchase agreement?

If so, here is my take on this often asked and argued topic. Some will make the argument that a lease purchase obligates the tenant/buyer to purchase the property within the agreed to time frame. Whereas a lease with an option to purchase is just that: a tenant/buyer has the option but not the obligation to purchase the property.

I use these terms, as well as Rent to Own, interchangeably. A homeowner is fooling himself if he thinks his house is any closer to being sold with a lease purchase than with a lease option. The property is either sold, and the title has changed hands, or it has not sold and the title remains the same. The fact that a tenant/buyer has obliged himself to purchase the property within a certain timeframe doesn't mean he will. What happens if he doesn't? Sure, the homeowner can take legal action. He'll probably win, too. Did you ever hear of a hollow victory? Well, this would be one example. The tenant/buyer is still not going to buy the house if he doesn't want to or cannot.

Thus, to me the idea of a lease purchase is not realistic and practical, and you are misleading any homeowner if you are not clear that you are leasing with an option to purchase.

[-Tony- 0]

let me clarify to some extent...I understand people use l/p to mean 1 form combining lease and the option.

my Question is it better to keep the lease and option seperate (2 Forms) or together as 1 Form (L/P)

 

thanks Tony

[chitown83 0]

Tony, for what it's worth, im new to this game too but I used to ask the same question. First of all, what everyone tells me is to not get confused by the 2 terms, they are the same, interchangable. As for keeping the 2 agreements separate, anyone I have ever asked has said yes. They say this is good to do to keep yourself safe in case the agreement ever gets to a courtroom. If the agreements are separate it will be harder for a judge to reclassify the agreement as a sale, instead of what it is, an L/O or L/P. Again, im new too, but take it for what it's worth.

 

 

Jim

[MichaelC 160]

Tony, Jim is correct but I want to further clarify.

When I do my deal with the homeowner my Pesidential Lease with Option to Purchase Agreement is one document. This is by design.

When I do my deal with the tenant/buyer, I use two separate Agreements: my Residential Lease Agreement, and my Option to Purchase Agreement. This, too, is by design.

Just as Jim noted, keeping the Agreements separate and distinct when doing a deal with the tenant/buyer puts them in a weaker position to claim they have equitable interest in the property.

On the other hand, by having one Agreement with the homeowner, you are in a stronger position to make that claim should the need ever arise.

Hope this helps.......

MC

[-Tony- 0]

thanks Jim

 

and

 

Thanks MichaelC

never thought of it that way

but I would also think that if a (I have to say it) DOS clause was called the combined form would not help your case. I don't understand how with an option it can get called (no sale has taken place) but, thats just me I guess.

Tony

[MichaelC 160]

Tony, in my opinion the DOS clause is a minor concern that I don't give much thought to. From personal experience I have never had it happen to me in any deal I've been involved in.

It seems to me there would need to be a remarkable and unlikely string of events for a lender to call a loan because said lender discovered the homeowner agreed to a lease with an option.

Doesn't make any sense to me as banks and lenders do not, at all, want foreclosed properties in their portfolio.

[-Tony- 0]

ROGER THAT,

I agree and am not to worried about the DOS

Tony