Posted by B.L.Renfrow on December 19, 1999 at 09:10:51:
Chris,
Yes, you are correct that your option IS a purchase contract, but with the addition of the option clause(s). In other words, the purchase option should contain all of the terms of the sale, including those you indicated.
I always use two separate contracts; a lease agreement and a purchase option/agreement, although I know there are plenty of people who use a single agreement, when they are the T/Ber. I find it easier to explain to the prospective seller, when there are two separate agreements involved, plus the use of two distinct agreements provides at least theoretical protection against a lender easily discovering the existence of an option, which typically constitutes a breach of the mortgage agreement.
And yes, there certainly should be a clause in the option agreement that prohibits the seller from further encumbering the property during the term of the option. Also, consider recording a memorandum of the option, which provides further protection against a seller doing exactly that.
You may want to check Bill Bronchick’s site (www.legalwiz.com) to see whether he has his L/O contract example posted there; I don’t remember.
Brian (NY)