Lease terms and due-on-sale

[gregzilla 0]

I've been doing some reading through the archives and I have a couple of questions about some things I found.

 

1. When doing sandwhich-leases, if either of the two lease agreements (seller-you or you-buyer) are over 24 months, could this trigger a due-on-sale clause? Or will any length of lease trigger it? 12, 24, 36, 48?

 

2. If you do a 1 year lease with option to buy or renew the lease with a buyer/tenant, do you go into the details of the renewal at that time?

 

For example: Say you offer a rent credit, take a $5000 option deposit and set the purchase price to $150000 for the 12 month lease-purchase. If after the 12 months, say the tenant wants to renew for another 12 months, but for the 2nd 12 months, you're not going to give anymore rent credit, you want to collect $2500 MORE option deposit and you raise the purchase price to $160000. Would you setup these numbers in advance so the tenant knows you're going to do this when they sign for the 1st 12 months? Or do you not let them know until they decide they want to do another 12 months - just telling them that the terms may change if they renew after the first 12?

 

Did this make sense to anyone?

 

Thanks,

Greg

[MichaelC 160]

1. When doing sandwhich-leases, if either of the two lease agreements (seller-you or you-buyer) are over 24 months, could this trigger a due-on-sale clause? Or will any length of lease trigger it? 12, 24, 36, 48?

Could it? Yes. Will it? In most every deal you will ever do, in every deal I have ever done, my answer is an emphatic "No!"

I say this because in the real world no one is watching these things. Pay the lender in a timely manner and you are not going to have them knocking on your door with the *RAP's as backup. I must tell you I don't spend sleepless nights worrying about the DOS clause.

2. If you do a 1 year lease with option to buy or renew the lease with a buyer/tenant, do you go into the details of the renewal at that time?

It's your call, Greg. I prefer to leave the terms open. If they want an extension after the original 12 months, I'll review my options at that time.

 

 

 

*Real Estate Police