Posted by phil fernandez on May 15, 2000 at 14:36:49:
As you know there are three profit centers with lease/ options. The upfront option money, the monthly rent spread and the back end profit when the option gets excercised.
Your concern seems to be that they excercise the option too fast so you don’t get many months of the rent spread. Boy that’s a tough one. You could in the original documentation state that the option could not be excercised for a year unless an additional $1,000 is paid at the time it is executed, but that might kill the incentive for the tenant/ buyer to enter into the agreement at the beginning.
How bout if you put a clause in at the beginning stating that if the option is not excercised for a year, you will credit the tenant/buyer an additional $500 toward the eventual sale price. However this credit of $500 would offset some of the rental spread you would receive in that first year.
Not sure if any of this makes sense. I’ll be curious what others may have to say about this situation.