Longer term Cooperative Assignment

[ErikOk 10]

I have a possible CA on a property. The numbers won't work for a SLO, but the seller is OK with a 3 year term, she even mentioned 5 year.

 

I know most CA's are 12 to 18 months and I am a bit concerned about the longer 3-5 year term for the buyer.

 

Say for instance the tenant-buyer gets 18 months into the lease and something happens in their life to where they can't continue with the remainder of the lease.

 

My main concern is with section 8 of the CA Residential Lease highlighted in red below.

 

8. CANCELLATION: The original tenant/buyer only may cancel this agreement at any time prior to the lease start date. Thereafter, if for any reason any subsequent tenants, tenant/buyers, or assignees elect to cancel this agreement prior to taking possession, there will be no refund of any monies paid. In addition, if subsequent tenants, tenant/buyers, or assignees elect to terminate lease agreement prior to scheduled termination date, they will be responsible for any damages incurred by landlord as a result of this action, and as allowable under state and local laws. These damages may include but are not limited to lost rent and income, advertising, clean up of premises, locksmith services, all maintenance and repairs, and travel expenses related to repairing and showing the premises.

 

I realize that this protects the seller from having a flaky tenant-buyer, but with such a long term I do have reservations for the tenant-buyer too.

 

So my question is this, with longer term CA's how do you all handle the tenant-buyer being able to get "off the hook" so to speak if they have a life changing event and can't honor their original commitment?

 

Do you put some sort of wording in the Section such a "Tenant-Buyer will give Seller 60 days advanced notice of intention to vacate premises", and just delete the section above that is in red?

 

I'm really trying to find a happy-medium here.

 

Please include wording that you use in your contracts.

 

Thanks for all your responses

Erik

[DanielSun 7]

CA with 12 to 18 months? That's too short. I thought 24 months or longer is the best!

[<Steve> 82]

You could set it up as a one year lease with the right to extend the agreement under the same terms for 3 additional 12 month intervals.

~MC

[ErikOk 10]

You could set it up as a one year lease with the right to extend the agreement under the same terms for 3 additional 12 month intervals.

~MC

 

Hey Steve. That seems like a reasonable solution. Do you have an example of what you use in your contract? Also, have you ever put in the contract about the Tenant/Buyer just having to give say 60 days notice?

 

Thanks again for the good idea on the right to extend.

[<Steve> 82]

You could set it up as a one year lease with the right to extend the agreement under the same terms for 3 additional 12 month intervals.

~MC

 

Hey Steve. That seems like a reasonable solution. Do you have an example of what you use in your contract? Also, have you ever put in the contract about the Tenant/Buyer just having to give say 60 days notice?

 

Thanks again for the good idea on the right to extend.

Erick, I asked the same type of qusetion of MC and I use this all the time. I put it on paragraph 1. in the lease agreement. This gives both the landlord and the tenant/buyer an out each year. It will also need to be included in the option to purchase agreement.

 

"Tenant [buyer] shall have the right to extend this Agreement under the same terms for 1 additional 12 month interval, if agreed to by the Landlord [seller] on or before the end of the first year."

 

Also, I typically only offer rent credits the first year. So although rent credits stop after the first year, if the option is extended the rent credits received are kept and carry over to any extended term. This is what I include in the rent credit paragraph:

 

"If this agreement should be extended past the first year, rent credits stop. Any rent credits received are kept and carried over to any extended term."

 

When the tenant/buyer enters into the agreement they know and agree to the lease term length and should be expected to honor it. It seems giving the t/b a 60 day out puts the seller at a great disadvantage. If something drastic happens it would be between the seller and tenant/buyer and they can modify or waive items in the agreement.

[MichaelC 160]

When the tenant/buyer enters into the agreement they know and agree to the lease term length and should be expected to honor it. It seems giving the t/b a 60 day out puts the seller at a great disadvantage. If something drastic happens it would be between the seller and tenant/buyer and they can modify or waive items in the agreement.

Worth repeating! Giving the t/b an out in a CA flies in the face of logic. If I'm the homeowner and read the agreement you are asking me to sign, allowing the t/b to skip out, the deal dies there and I show you the door.