Equitable Interest

[Gordon Holtner 0]

Hi everyone

 

 

I am just curious real estate guru say that rent credits and having a L/O as one agreement could be considered by the law as special financing and give the tenant

equitable interest in the property. Is this true or is this all just unwarranted fear speading rumors to get more people to buy more courses?

[jtlab 0]

Hi  everyone

 

 

    I am just curious real estate guru say that rent credits and having a L/O as one agreement could be considered by the law as special financing and  give the tenant 

equitable interest in the property.  Is this true or is this all just unwarranted fear speading rumors to get more people to buy more courses?

<{POST_SNAPBACK}>

 

I am not no lawyer or l/o guru but

I read the same thing. The author in my book also said to use a separate lease and option agreement to get around that law. The law specifically refers to lease/option agreements.. not separate lease and option agreements. Jeez.. i read to much lol. I can not wait to start doing!)

19 more days.. 19 more days!:

[Adam King (MI) 1]

Guys,

Yes, you want to separate your agreements because some judges see an option as a contract for deed. Don't ask, I don't know.

 

The reason you keep the two agreements separate is for when you do an eviction, the court only sees the rental agreement when the papers are filed. If you filed the rental agreement and it had an option built into it, especially if there were rent credits, that's when you get into trouble. That's why most of our agreements (Rent with a separate Option) tell the tenant that they are not allowed to do a memorandum of option. We don't want anyone to construe an option as equitable interest. And in all actuality, it's not.

 

This is another reason why OUR agreements when we do an SLO (Us as the tenant/buyer) CAN be one contract. It puts the ball in our court.

Regards,

Adam

[MichaelC 160]

What Adam said. My Lease agreement and option agreement between the t/b's and myself are always distinct and separate. Conversely, when doing a sandwich lease, the lease and option agreement between the homeowner and I are one.

As for rent credits creating problems, I have also read the argument that they could bolster the equitable interest position of a t/b. I have read the argument, but I have never seen a ruling to that effect in court. So much depends upon the wording in your contracts, I would think.

[-Tony- 0]

What they said. And if you're worried about it, draft something up in MS Word stating the t/b has no interest in this property until they get their own financing. Have the t/b sign and you're on your way.

[Gordon Holtner 0]

Thanks guys for clearing that up I bought 2 courses about 4-5 months back before Doug directed me to this board and one did Sandwich options that didn't separate the Lease and the Option the second did Sandwich Options but with a the buyer getting a purchase contract and a lease but didn't give any rent credits.

 

Before I found out about the equitable interest situation I was just going to use the documents from the second course use the inital L/O agreement and use the assignment form included in the course to do a CA. The L/O form is a combined agreement. But now that I think about it that is a mistake and I should use separate agreements.

 

Tony I thought about the getting the TB to sign a waiver releasing any rights to any interest in the property until they get financing. But it is just damn I just wasted about $300 for garbage when I could have bought MCs course.

[AmyB 0]

What Adam said.  My Lease agreement and option agreement between the t/b's and myself are always distinct and separate.  Conversely, when doing a sandwich lease, the lease and option agreement between the homeowner and I are one.

As for rent credits creating problems, I have also read the argument that they could bolster the equitable interest position of a t/b.  I have read the argument, but I have never seen a ruling to that effect in court.  So much depends upon the wording in your contracts, I would think.

<{POST_SNAPBACK}>

 

Wow! Am I glad to see this thread.....now I don' t have to start one! I have a SLO where the agreement I signed with the HO is "one." I put a TB in there a year and a half ago and now that we're getting ready to close, but the contract has expired, the HO/seller says they've "decided not to sell." This is a builder and the 3rd house I've bought from them. They do not need to sell for money, and since the house has appreciated it a lot, they want to keep it. I of course, do not want to lose my profit. I have faxed over our agreement to the atty and waiting for reply if we have equitable interest. Even though it's expired, I'm hoping a judge would think we do! Any suggestions?

[West Coast Girl 1]

Thanks guys  for clearing  that up I bought 2 courses about 4-5 months back before Doug directed me to this board and  one did Sandwich  options that didn't separate the Lease and the Option the second did Sandwich Options but with a the buyer getting a purchase contract and a lease but  didn't give any rent credits.

 

Before I found out about the equitable interest situation I was just going to use the documents from the second course use the inital L/O  agreement and use the assignment form included in the course to do a CA. The L/O form is a combined agreement. But now that I think about it that is a mistake and I should  use separate agreements. 

 

Tony I thought about the getting the TB to sign a waiver releasing any rights to any interest in the property until they get financing. But it is just damn I just wasted about $300 for garbage when I could have bought MCs course.

<{POST_SNAPBACK}>

 

Gordon,

 

Whose course(es) did you purchase?

[Gordon Holtner 0]

West Coast Girl

 

 

The courses I purchased are Nikita Thoerele's Lease Option In Canada course it sucked the lawyer I had review it said I'd be a fool to use the contracts for myself and the TB. I also bought Matt Boman's Canadian Lease Option course. Matt's course was informative but it left a lot to be desired because it doesn't focus on maximizing your profit but is more concerned about getting a Tb in the home and buying it to get more back end profit when they buy. In an SLO you can never guarantee a sale but that is pretty close to what the course trys to do. Like getting a TB to give 2% down and being responsible for all repairs and trying to get a TB to do them seems a little to risky for me right now especially when I don't have the money to back myself up. CAs are better because I can get the 2% and assign the contract and have no liability what could be better?

 

Gordon Holtner

[Krusty 0]

Gordon,

 

Just curious as to what forms you are using/intend on using for CA's? I am in Ontario and I also bought Matt Bowman's courses and forms. I know that Doug uses forms that are more like a Land Contract with assignment due to the power of sale process here. Doug...would these forms not give the t/b equitable interest in the property even if they defaulted?

[Doug Pretorius (ON) 9]

In Ontario an installment sale is not considered a mortgage, so it doesn't matter if the buyer has equitable interest, you won't have to do a power of sale to get them out.

[MichaelC 160]

What Adam said.  My Lease agreement and option agreement between the t/b's and myself are always distinct and separate.  Conversely, when doing a sandwich lease, the lease and option agreement between the homeowner and I are one.

As for rent credits creating problems, I have also read the argument that they could bolster the equitable interest position of a t/b.  I have read the argument, but I have never seen a ruling to that effect in court.  So much depends upon the wording in your contracts, I would think.

<{POST_SNAPBACK}>

 

Wow! Am I glad to see this thread.....now I don' t have to start one! I have a SLO where the agreement I signed with the HO is "one." I put a TB in there a year and a half ago and now that we're getting ready to close, but the contract has expired, the HO/seller says they've "decided not to sell." This is a builder and the 3rd house I've bought from them. They do not need to sell for money, and since the house has appreciated it a lot, they want to keep it. I of course, do not want to lose my profit. I have faxed over our agreement to the atty and waiting for reply if we have equitable interest. Even though it's expired, I'm hoping a judge would think we do! Any suggestions?

<{POST_SNAPBACK}>

Amy, seems to me it will all come down to the wording in your agreement with the homeowner. Without knowing all the details, I'd venture a guess that you are out of the picture. I mean, you did say "the contract has expired".

[Krusty 0]

Doug,

 

so in Ontario, using an installment sale, if a t/b'er misses one payment you can ask them to leave as the terms of the contract have not been met? I'm not saying you would like to do this, but just wondering if this falls under the tenant/protection act in Ontario or straight contract law?

 

Thanks,

Russ

[West Coast Girl 1]

West Coast Girl

 

 

  The courses I purchased are Nikita Thoerele's Lease Option In Canada course it sucked the lawyer I had review it said I'd be a fool to use the contracts for myself and the TB. I also bought Matt Boman's Canadian Lease Option course. Matt's course was informative but it left a lot to be desired because it  doesn't focus on maximizing your profit but is more concerned about getting a Tb in the home and buying it to get more back end profit  when  they buy.  In an SLO you can never guarantee a sale but that is pretty close to what  the course trys to do.  Like getting a TB to give 2% down and  being responsible for all repairs and trying to get a TB to do them seems a little to risky for me right now especially when I don't have the  money to back myself up. CAs are better because I can get the 2% and assign  the contract  and have no liability  what could be better?

 

Gordon Holtner

<{POST_SNAPBACK}>

 

Gordon,

 

I know exactly what you mean. I bought Matt's courses too.

 

Also, it is impossible in today's market to ask some to take a discount and then tell them that they have to wait 3-5 years for their money. That is just plain ridiculous (around here anyway, in this hot, hot, Vancouver market I am experiencing). I've tried working this for over a year now with absolutely NO LUCK!

 

Somehow I ended up in this forum and discovered CA's (I was looking for a way to make this R.E. work for me. I knew that there had to be a way, 'cause tons of other investors are). What I really discovered was that hey, this could really work and it also really appeals to me. I don't have to "take advantage of desperate people". I also don't feel comfortable with that type of investing either.

 

Anyway, because I too bought Matt's course I thought I would get Matt's opinion on CA's since he's so well versed in doing creative deals. What I found out is that he does not like them. Here is the list of negatives that he wrote me.

 

1. Most sellers have no clue as to how to get someone

financed. This means that the VAST majority of these

deals will never close. That will result in

tenant/buyers getting kicked out and losing their

deposits, or a legal battle between seller and

tenant/buyer. This can mean everyone comes back to

that "consultant" who set the deal up in the first

place to be angry with and possibly sue. I HAVE to

manage my tenant/buyers in order to get them financed.

It is EXTREMELY rare that any of them have ever got

financing on their own, or even known where to start,

even when my mortgage broker tell me that they can get

their financing in 6 months or less. I have to work

with them and my mortgage broker, as well as keep

meticulous records on the deal in order to get them

financed. I don't see an average seller having any

clue as to how to accomplish this, resulting in very

few, if any of these actually closing.

 

2. This could be interpreted as acting as agent

without a license. Since you are finding a buyer for

the seller, you are NOT acting as a principle in the transaction, you are acting as an agent, even if you are assigning your agreement to the buyer. An agent looking for trouble or to put you out of business could get the real estate board to investigate you and your business, then possibly sue you, resulting in fines.

 

3. If the tenant/buyer defaults, sure the seller can

evict them, but the tenant/buyer could damage the

place or drag out the eviction with an argument about

equitable interest. Sure, none of that is YOUR

problem, but who is the seller going to blame? What do

you think that might do to YOUR reputation?

 

I don't know if Matt said these things because he believes these things could or would happen or if perhaps that he really doesn't know how CAs work ... especially how they are done the Michael C. way.

 

By the way, I have not taken Matt's "expert advice". I am in the process of finding me a seller(s). I called 40 people the other day and all those properties had been rented. Unbelievable, those ads were aged only 2 weeks.

 

Michael C, could you please chime in here and put the positive spins on these negatives.

 

I need to feel all warm and fuzzy that I am doing the right thing here!

 

 

Thanks,

 

WCG

[happyardy 0]

Wow! Am I glad to see this thread.....now I don' t have to start one!  I have a SLO where the agreement I signed with the HO is "one."  I put a TB in there a year and a half ago and now that we're getting ready to close, but the contract has expired, the HO/seller says they've "decided not to sell."  This is a builder and the 3rd house I've bought from them. They do not need to sell for money, and since the house has appreciated it a lot, they want to keep it.  I of course, do not want to lose my profit. I have faxed over our agreement to the atty and waiting for reply if we have equitable interest.  Even though it's expired, I'm hoping a judge would think we do!  Any suggestions?

<{POST_SNAPBACK}>

 

Amy,

What were the terms between the HO(A) and you ? Doesnt the option term end with the end of the lease usually ? How could you have your T/B[C] in that house after your contract with HO(A) expired ?

This scenario could be possible if you had a lease of say, 2 years with your HO but your option term was only for the 1st year. That way after your first year, your lease with HO(A) would continue, but your option would end. Is that how you did it ? Did you lose your option money to HO(A) ?

Also if you have SLOed it, doesnt your T/B[C] get a one-way right to purchase the house as per your option contract, if T/B decides to exercise the option ? Can you tell your T/B[C] that you cannot sell the house because the original HO(A) decided not to sell anymore ?

Please let me know. I am a little bit confused. Maybe my understanding of this whole thing is wrong.

thanks

- Ardy