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GetErDun

Contracts, AZ law mentioned in Getsmarts post

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I read GetSmarts post quoting

 

These Laws are based on Arizona Legislation that has been in place for years. According to Arizona Law, here are five things that violate the law or cause the court to classify the transaction as a sale.

 

1. Collection of more than 1.5 times the monthly rent as an Option Deposit.

2. Collection of an ???Option Deposit??? or ???Rent Credit??? to be credited to a Purchase or to Discount the Purchase, as in a Down Payment.

3. Pre-Determining a Discounted or end Purchase Price as in delaying or disguising a sale.

4. The Lessee also holding an Option on the same property in which they are leasing regardless if it is one document or two separate documents.

5. The Lessee being responsible for maintaining the property.

 

I am in Arizona and have not heard of these things. I tried to research it looking up AZ contract law, AZ lease option law, etc but am only finding the landlord/tenant act.

 

Can anyone direct me to where I can look up the above points to see if they are valid?

 

Thanks!

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I assume you have already looked here. If not, maybe you'll find some answers there. If you already have, check with a real estate attorney or the local REIC.

By the way, I spoke to Claude Diamond about this matter. He is ground zero as far as I'm concerned when it comes to matters of lease options. On the phone, he took apart that article point by point. I was hoping he was going to come in here and share some of his insights into this, but I guess he's been too busy. If you're really concerned, you can always call or email him. Friendly guy, loves to talk shop.

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I assume you have already looked here. If not, maybe you'll find some answers there. If you already have, check with a real estate attorney or the local REIC.

By the way, I spoke to Claude Diamond about this matter. He is ground zero as far as I'm concerned when it comes to matters of lease options. On the phone, he took apart that article point by point. I was hoping he was going to come in here and share some of his insights into this, but I guess he's been too busy. If you're really concerned, you can always call or email him. Friendly guy, loves to talk shop.

Hey Mike if its not too much trouble can you give us cliff notes on what was discussed by Claude. I have one of his audio boot camp trainings in Las vegas somewhere, but it didn't go into these sort of details. I would have to look for the audios but something up-to-date would be swell.

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1. Collection of more than 1.5 times the monthly rent as an Option Deposit.
I think the way around this is collecting two seperate fees. One that is refundable per the terms of your lease, but it would require more money down. Charge the first months rent. Then a maybe 1.5 months for a refundable deposit. And a option fee of 1.5 months of rent for an option fee.

 

 

2. Collection of an ???Option Deposit??? or ???Rent Credit??? to be credited to a Purchase or to Discount the Purchase, as in a Down Payment.
I don't think the option fee should apply towards the actual purchase. Plus you will probably need a seperate agreement addessing the rental credit issue, mainly saying its non-negotiable, non-transferable, non-cashable, non-redeemable. If your seperate agreement goes into details, i don't think there is a way to claim equity.

 

3. Pre-Determining a Discounted or end Purchase Price as in delaying or disguising a sale.
I think that is why you need a seperate agreement. People use options all the time and as long as the option is valid and not exercised, i don't think it would be considered a sale.

 

4. The Lessee also holding an Option on the same property in which they are leasing regardless if it is one document or two separate documents.
The poster where i got this thread from uses a right of first refusal. The way the right is worded is still considered an option. Just because someone uses a different name doesn't mean it is what they say it is. I think if you word a right of first refusal with the same language as an option, it would be determined an option. They use terms; the lessee may be able to purchase the property for a fair market value (which is setting a term, the price of fair market value). they don't give rental credits. Here is the thing that makes a right of first refusal different than a option. The right of first refusal gives the lessee the first opportunity to purchase the property should the lessor decide to sale, by adding the property will be sold at fair market value makes the right of refusal a disguised option. The right of refusal isn't promising the lessee that the lessor is going to sale, plus if the lessor does sale, the lessee will have to match any bonafide offers.

 

The kicker is they refund the option deposit whether the lessee exercises their right to purchase or not. The way they do it is extremely complicated and more can be reviewed by Clicking here.

 

5. The Lessee being responsible for maintaining the property.
That is why you use two seperate agreements, because a renter is not required to maintain a property but an optionee can be held liable due to the terms of the option.

 

 

I am in Arizona and have not heard of these things. I tried to research it looking up AZ contract law, AZ lease option law, etc but am only finding the landlord/tenant act.
Note i am not an attorney, i don't give advice. I just give my opinion on selected topics. If you use anything i said as legal advice, its your fault because you shouldn't take advice from strangers in public settings, because you could be getting advice from a pre-teen. :blush:

 

 

 

Here is something I found, and just wanted to some takes on this review Click Here.

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GetSmart, John Reed is a laughinstock and the biggest blowhard on the internet. He bashes anyone and everyone, then mentions, by the way :ninja: , that he happens to sell a book or two on real estate investing. Sorry, but if you're going to put yourself out as an independent, unbiased seeker of truth, there can't be such an obvious conflict of interest.

But I did manage to find one "guru" Reed loves. His name is Robert Abalos, and he was recently disbarred. So much for Reed's credibility.

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Sorry, but if you're going to put yourself out as an independent, unbiased seeker of truth, there can't be such an obvious conflict of interest.

But I did manage to find one "guru" Reed loves. His name is Robert Abalos, and he was recently disbarred. So much for Reed's credibility.

Makes perfect sense, plus that is a shame about Bobby. I might have to send JTR a copy of that link so he can take the current review down since after recent facts it is very misleading. I am betting he won't respond. :ninja:

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First, thank you for all your replies. Sorry I haven't been back to thank everyone. I have become so paralyzed by inaction that I find it hard to even drop in.

 

I hadn't been to that site MC, but have done some looking around. Thanks!

 

Thanks to everyone else, I am indebted to this site for all the quality information everyone readily provides.

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