As a CA/ property manager locating motivated sellers willing to allow me to assign a lease option on their home.

DO I have any liability collecting a non refundable option fee if the seller decides not to make the mortgage payment?

How am I protected if at all?

Thank you,

Thomas, I'm not an attorney, but my understanding is when you assign your interest in the deal to a third party, you are out of the loop with regards to what happens down the road. Read the CA Assignment of Agreement. I think it's quite clear.

Thomas,
I have it in my contract that the consideration was the assignment fee, is going to be applied to the tenant/buyer's purchase price and if for any reason the seller cannot fulfill their obligations, they owe the ENTIRE amount back plus a $500.00 fee for liquidated damages.
Not only does that put me into the clear (everything is speculative) it makes the owner accountable and yes, that's the way it should be!
Hope that helps,
Adam

Adam,

thanks for that. this was an excellent question. I thought the same thing. Would you mind giving us the exact wording?

Thanks,
Rosanna

Here's a sample only clause. (This is not legal advice whatsoever, only an opinion of an example.)

G. Optionee understands that Optionor does not hold title (own) this property, but is transferring their interest in the property. If Optionor can’t transfer title due to something out of their control (ie. owner refuses to close or can’t transfer clear title). Optionor will reimburse Optionee the entire option consideration plus an additional $500 for their inconvenience, as full and complete liquidated damages for Optionor not being able to close on this property.

This is a sandwich lease option clause, but once it's assigned to the seller, then this clause becomes the seller's responsibility as the seller becomes the optionor. (Responsility can be outlined in your assignment agreement reflecting the changes in ownership as optionor to assignor)

At that point you (now the seller, or your assignee "the seller") could also have your attorney change the clause to reflect that the seller is in fact, the owner and if they cannot sell with clear title etc, then this agreement would have the same ramifications allowing the tenant/buyer to recoup their consideration plus $500.00 for complete and liquidated damages. And if you ever assign your interest to a seller and they do in fact, make changes to this agreement, then it is only fair that the same terms apply. I have had sellers not like the idea of paying someone back when I received the money as an assignment fee plus $500.00 but it's only fair to the tenant/buyer. I then put it back on the seller and say; so you're trying to tell me that the tenant/buyer shouldn't have security if this matter even when they just gave us $5,000.00? That usually works to prove if the intention of the seller is truly where it should be.

Hope that helps,
Adam