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I don't get this option money paragraph in a letter of intent

option money

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#1 Dino

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Posted 08 September 2015 - 08:04 PM

I don't get this paragraph in a letter of intent to lease option property. ... applied first to any assignment fee? ... balance being applied as a credit to the option price? Huh? Why would I be giving the Landlord/seller money to apply to an assignment fee to which I'm entitled? Please explain.

 

 

Option Money. Tenant or its assign(s) shall pay to Landlord the a non-refundable amount of _____________________________________ (“Option Money”), which shall be applied first to any assignment fee that Tenant may be entitled to through its assignment of its interest to any 3rd party assignee, with the balance being applied as a credit to the Option Price.

 



#2 MichaelC

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Posted 09 September 2015 - 06:59 AM

My understanding is that the money being paid by the tenant/buyer will be divided between assignment fee and option consideration, as has been agreed to between the parties.  For example, $5K is being paid by t/b, with the understanding that $3K is assignment fee disbursed to the assignor, and the balance of $2K being a credit towards the purchase of the property.

Of course, I'm not an attorney and that isn't my contract, so I could be wrong.  Who's paperwork is that, Dino?



#3 Dino

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Posted 09 September 2015 - 09:36 PM

I'm not sure. Now that I know what it possibly means, I don't plan to divide monies this way. If you don't mind me asking, what is the verbiage you use to address the option money in your letter of intent?

#4 MichaelC

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Posted 10 September 2015 - 10:17 AM

I don't use a Letter of Intent, specifically.  When doing a Cooperative Assignment, my first document to the homeowner is my Short Offer Letter, which only highlights the terms, such as length of lease, rent, and purchase price.  No mention of option money is made.  In fact, I never bring up option money until the homeowner does. . .and they will.

When the terms are agreed upon, I then have the lease and option agreements prepared and signed.  When I find the t/b then I complete the paperwork with the Assignment Agreement.  It's on this last document that option money is mentioned, stating that the full amount will be credited towards the purchase price.



#5 Dino

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Posted 14 September 2015 - 07:19 PM

Thank you.




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