Due on Sale clauses, Land Contracts and L/O's - Posted by ChrisG

Posted by J.P. Vaughan on May 26, 1999 at 11:51:57:

Go to the How-To Articles page and read Bill Bronchick’s
articles, “How To Beat The Due On Sale Clause.”

Due on Sale clauses, Land Contracts and L/O’s - Posted by ChrisG

Posted by ChrisG on May 26, 1999 at 08:47:21:

If a seller has a due on sale clause in their contract what should I look for in the wording of their original contract to determine if a land contract or a lease option would be the best technique to use without triggering the due on
sale clause?

My impression is that a land contract may trigger the due on sale clause if the original mortgage holder happens to find out about the land contract on the property. From what I have read I should instead setup a lease option on the property and have the seller apply 100% of the lease payment towards the principle/purchase price. Supposedly this accomplishes they same thing as a land contract but protects the seller from triggering the due on sale clause. The one caveat of the L/O being if the wording on the original contract also states that using a L/O would trigger the DOS.

I’m currently in the beginning stages of a deal and have not yet seen the original contract. I need to get some advice on what to lookout for. By the way I will be working with a R/E attorney if this deal goes the way I want it but I want to be able to do as much leg work before involving my lawywer.

I want to submit an offer and add a clause making it contingent to my attorney reviewing the sellers contract to ensure that the DOS cannot be triggered by which ever method we decide to use for the purchase of this property. Doe’s anyone have a clause like this on their purchase contract? If so please post it or email me privately.

Thanks,

Chris
Columbus, Ohio

Re: Due on Sale clauses, Land Contracts and L/O’s - Posted by Bronchick

Posted by Bronchick on May 26, 1999 at 10:19:25:

Both a lease/option and land contract trigger the due on sale.

Re: Due on Sale clauses, Land Contracts and L/O’s - Posted by ChrisG

Posted by ChrisG on May 26, 1999 at 11:03:37:

What can I do to work around the due on sale clause?

Thanks,

Chris

Re: Due on Sale clauses, Land Contracts and L/O’s - Posted by Bill Gatten

Posted by Bill Gatten on May 27, 1999 at 15:31:44:

You’re getting good advice here, but…

What ever you do don’t get involved in a 3rd party trustee co-beneficiary land trust arrangment wherein the property is NOT sold, or transdferred beyond the land trust (completely avoiding Due-on-Sale admonitions as per the FEDERAL LAW [GSG]); and wherein a sale per se WON’T take place until the resident can sell or re finance in his own name; and where the buyer gets 100% of the benefits of ownership (tax w.o, equity, appreciation, etc); and where the property is solidly protected from liens, suits and judgements; and where the seller gets 100% of the SAME benefits he’d have in a L/O or Land Contract!! These kinds of transaction are just to safe, too easy and equitable to be involved in! And…above all…do not go to the Cal-quity banner ad at the top of this page!

My Gawd… the dread!

Bill

As a kid, did your Dad ever ignore you when he was tearing the house apart, franticaly searching for his car keys, and you were pointing at them and screaming out their whereabouts as loud as you could?

Re: Due on Sale clauses, Land Contracts and L/O’s - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 26, 1999 at 11:52:18:

Chris-

There’s just too much you need to know about it to post in a reply. Read the articles in the Legal Corner, and How-to sections of this board. Also, there is a thread, below, which discusses the Due On Sale Clause:

http://www.creonline.com/wwwboard/messages/26249.html

Stacy