Lease/option with assignment of contract

[Craig 0]

I sign a lease/option for a 4 year lease with a assignment. What could I be liable for if the home becomes vacant? Lets use a time period of say 4 months or the tenant doesn't pay his rent per contract.

 

Can the homeowner sue me to get all unpaid rent per the contract? How do others get around this problem?

 

I have discussed this with my lawyer and it wasn't a problem as long as the intent was fully disclosed. The homeowner wasn't comfortable with all the out clauses I intended to have in the contract. With this he wasn't interested in doing a lease/option. This was my first deal that sounded to good to be true.

 

My wife asked why doesn't the homeowner do the same thing and make all the profit. Good point without the spin.

 

By the time the lease/option is understood why would someone go to a middle man?

 

How do other investors get around these problems?

[Dave T 0]

Can the homeowner sue me to get all unpaid rent per the contract? How do others get around this problem?

In my humble opinion, the answer is YES. To protect yourself from this potential pitfall, include a clause in your lease option agreement which releases you from liability if and when your interest is assigned to another tenant/buyer.

 

I would be interested in seeing Legal Eagle's feedback on this question.

 

My wife asked why doesn't the homeowner do the same thing and make all the profit.

I would hope that the homeowner does not see your profit. When you assign your lease option to another tenant buyer, the tenant buyer takes your place in the original agreement under your original terms. Is the assignment fee you collect from the new tenant buyer ever revealed to the original landlord/seller?

 

As I see it, the homeowner is not getting any more or any less profit as a result of your assignment. You however, by not staying in a sandwich lease arrangement, are forfeiting future backend profit in exchange for an assignment fee now.

 

If I am way off base, I hope someone will step in and put us both back on track.

[MichaelC 160]

Hi, Craig. What Dave T said is completely accurate. Let me add a few pennies myself.

Much of what you can and cannot do in any real estate deal, and much of what you are and are not liable for all comes down to your contracts. I don't know what your's say but, generally, a good contract should specify that if and when you assign your agreement to a third party, in so doing you are released of all liability in the event something should go wrong.

Can the homeowner sue me to get all unpaid rent per the contract? How do others get around this problem?

Can a homeowner still file a lawsuit against you? Sure. In this day and age, we have another frivolous lawsuit in the headlines almost weekly. So, yes, someone can always try and sue you for anything they damn well please. However, whether or not they are successful will come down to the wording in your contracts and agreements.

I have discussed this with my lawyer and it wasn't a problem as long as the intent was fully disclosed. The homeowner wasn't comfortable with all the out clauses I intended to have in the contract. With this he wasn't interested in doing a lease/option.

Again, it comes down to how the contracts were written, and how the deal and the advantages of the deal were presented to the homeowner.

My wife asked why doesn't the homeowner do the same thing and make all the profit. Good point without the spin.

 

By the time the lease/option is understood why would someone go to a middle man?

Tell your wife that's a good question. And the answer is "knowledge", Craig. The average homeowner sells three properties in a lifetime. We can do three in a month. Who is better able to put the deal together?

And the other factor in all of this is the motivation level of the homeowner. Someone with a problem, someone who needs debt relief, is going to see you as their ally, not their adversary.

[Akinwale 0]

Hi, Craig.  What Dave T said is completely accurate.  Let me add a few pennies myself.

Much of what you can and cannot do in any real estate deal, and much of what you are and are not liable for all comes down to your contracts.  I don't know what your's say but, generally, a good contract should specify that if and when you assign your agreement to a third party, in so doing you are released of all liability in the event something should go wrong. 

Can the homeowner sue me to get all unpaid rent per the contract? How do others get around this problem?

Can a homeowner still file a lawsuit against you? Sure. In this day and age, we have another frivolous lawsuit in the headlines almost weekly. So, yes, someone can always try and sue you for anything they damn well please. However, whether or not they are successful will come down to the wording in your contracts and agreements.

I have discussed this with my lawyer and it wasn't a problem as long as the intent was fully disclosed. The homeowner wasn't comfortable with all the out clauses I intended to have in the contract. With this he wasn't interested in doing a lease/option.

Again, it comes down to how the contracts were written, and how the deal and the advantages of the deal were presented to the homeowner.

My wife asked why doesn't the homeowner do the same thing and make all the profit. Good point without the spin.

 

By the time the lease/option is understood why would someone go to a middle man?

Tell your wife that's a good question. And the answer is "knowledge", Craig. The average homeowner sells three properties in a lifetime. We can do three in a month. Who is better able to put the deal together?

And the other factor in all of this is the motivation level of the homeowner. Someone with a problem, someone who needs debt relief, is going to see you as their ally, not their adversary.

<{POST_SNAPBACK}>

 

Kind of dumb question..but I dont want to wait until I get the manual and forget the question. MC, your contracts have this clause in them, right??????

 

Thanks Akin

[Kimberly 0]

What clause? If you mean release of liability, it's in the CA Assignment form.

[Akinwale 0]

What clause?  If you mean release of liability, it's in the CA Assignment form.

<{POST_SNAPBACK}>

Sorry should have elaborated a little more. Yep you got it Kim.."Release of liability"

 

 

What happens if you are not able to find a TB? Is there a clause in the contracts that would release you from them? Or how would you handle this situation?

 

Thanks,

 

Akin

[Kimberly 0]

What happens if you are not able to find a TB? Is there a clause in the contracts that would release you from them? Or how would you handle this situation?

If you're doing a CA and can't find a tenant/buyer, you have an out in the lease. It states that you can cancel anytime prior to the start of the lease. Remember, your lease start date will be in the future, and is not the date of the contract.

[<Steve> 82]

If you're doing a CA and can't find a tenant/buyer, you have an out in the lease. It states that you can cancel anytime prior to the start of the lease. Remember, your lease start date will be in the future, and is not the date of the contract.

 

And this is one of many things I like about doing L/O the Naked-Investor way. You can intitialy take procession of the property, make no payments until the T/B is found, and if you have to give the proerty back to the seller, you can do that too. And you are protected in the contracts. Sweet!

 

<S>

[MichaelC 160]

One of the things that has improved with age, (in addition to me, I mean ), are the contracts I use. Meaning, I have a number of safety nets in place as I like to call them. Clauses that came about based on experience.

You've already been told about the cancellation clause which allows you to cancel at any time if doing a CA, and within an agreed to time if doing a sandwich lease.

When assigning the deal, be it a straight assignment or a Cooperative Assignment, there is a release of liability clause, also.

Finally, I also address the issue of liability in the event we ever need to break a lease agreement with the homeowner. The clause states that our liability is limited to that money which has already been paid. Without that, we would potentially be liable for months of rent payment until a property homeowner was able to find another tenant.

[-Tony- 0]

and if I remember corectly MC had his contracts changed, not only di he notify everyone he sent the new forms....what a guy

 

 

But still no spell check

[MichaelC 160]

....what a guy

Oh, yeah!

But still no spell check

How quickly the sentiment changes around here.

[Gary (MO) 0]

Hey Michael~

When did the contracts change? Have I gotten in on the 'updated' ones from the start or did I miss the update?

 

Gary

[Dave T 0]

I'm also in the same boat as Gary. I did not get included in the update cycle either.

[Kimberly 0]

I pulled out my manual. It says revision June, 2003. Maybe that was when he updated the contracts.

[Gary (MO) 0]

I'll bet you are right Kimberly...mine says the same thing. That's probably why Dave and I didn't get an update.

 

I'm thinking mine came with a spell checker though....

 

Gary