Lease-Option Question - Posted by Aaron

Posted by David H on March 24, 2002 at 15:55:55:

TJ’s entire response, which I received by email, is below. I include excerpts immediately below.

>David, "the fact I “oversee” or have “day-to-day
>involvement” does not, as a matter of law, trigger
>liability on my part.

I agree with that. But that’s not the point I’m making. The point I’m making is that everyone is personally liable for the decisions and actions that they make or take. (And this is consistent with the legal advise that I have received, and that reported to have been received by another poster, below.) The LLC/Corporation needs a natural person(s) to effect the agenda of the company. If the person doing this is negligent in their actions, they are liable. For a single-member LLC, there is no such thing as a “mere member” - there is someone effecting the agenda of the company, and by definition, it can only be one person, and where they are deemed to be negligent in their actions, they can be held liable. I’m not claiming they are liable for everything to do with the LLC in every case. I’m saying that it may not be clear to some people that simply setting up the LLC does not completely remove one’s liability for one’s actions.

>Nor does the fact I sign as as “member” for my LLC
>make me magically responsible for all actions on its >behalf.

I agree. I never suggested otherwise. But there is a distinction between you, “overseeing” the day-to-day operations of the LLC and, for example, your brother who contributed equity to the LLC and is a “mere member” by virtue of not having to do with day-to-day operations. If you are negligent in your day-to-day activities of the LLC, you may be liable, while, certainly, your brother - a “mere member” in the true sense - would not.

TJ has posted a response to your message titled
Re: Not So Fast in CREOnline News Group.

The posted reply can be found at the following URL:

If the reply pertains to an ongoing discussion, it is
requested you go to the above URL to post any response.

The posted reply reads as follows:

Dated : March 24, 2002 at 11:33:06
Subject: Re: Not So Fast

David, "the fact I “oversee” or have “day-to-day involvement” does not, as a
matter of law, trigger liability on my part. There is simply no such legal
doctrine. Nor does the fact I sign as as “member” for my LLC make me magically
responsible for all actions on its behalf. To be liable, I must have actually
personally committed the injury-producing negligence MYSELF, along with or independent
of my underling. Otherwise, his negligence is NOT imputed to me as an
individual regardless of my active involvement in the property. His negligence IS
imputed to his employer or and the LLC/Corp, neither of which is me personally even
if I alone comprise the entire membersip or slate of officers. You are missing
the point of what these entities are.

And as for gratuitous repetition, you seem a little stuck on this “no matter
what liability protection it affords, you can still be sued.” This is really the
statement that is meaningless out of context. I can sue my mother in law
because I don’t like her face. My lawsuit will die a speedy death though since it
still comes back to what the law says about liability. As some other posts have
rightly pointed out, there are situations where an entity does not protect the
individual and it is essential to understand that they do not afford
invincibility; however, this whole discussion began with someone’s inordinate and legally
false statement that LLCs and Corps give no real protection, and that’s what
spurred me to respond.

Lease-Option Question - Posted by Aaron

Posted by Aaron on March 22, 2002 at 17:24:25:

Hello Everyone-

I have a question. A lady called me because she is moving out of state and needs to sell her house by June. (This was about 2 weeks ago by the way)

Well, she’s owned the house since 1995, it’s a T/H with 3br and I beleive she said 1 1/2 baths. The house doesn’t need any major repairs.

She owes I beleive 69k and is asking 71k. Not much equity, I know. I was thinking of lease optioning the property from her and then sub-leasing it.

Does this sound like a pretty good solution for me to get the property no money down? My only concern I guess is that she is moving out of state. I guess since my name isn’t on the deed or loan if she stops paying the mortgage it falls on her, doesn’t it?

Well, any advice or suggestions would be greatly appreciated! God bless!


One more thing. - Posted by JohnBoy

Posted by JohnBoy on March 23, 2002 at 16:56:45:

If you are going to say you can’t afford to buy a course right now then the LAST thing you need to be doing is getting involved with any deals you will remain in the middle of. If you can’t afford to shell out a few hundred now to buy a course then HOW are you going to pay to cover any payments if your buyer stops paying? How would you cover the cost of evicting them, pay for any repairs if they damage the place, pay to advertise to find another buyer and meanwhile cover all the payments while your buyer lives in the property for free until you get them out and find another buyer to replace them with?

So if you can’t afford to buy a course right now then you need to first learn how to build your cash reserves up before remaining in the middle of any deals you can’t afford to get involved with.

For more info on getting started read this link:

Re: Lease-Option Question - Posted by JohnBoy

Posted by JohnBoy on March 23, 2002 at 16:48:34:

The first thing you really need to do is to buy a good course on doing L/O’s. If you don’t fully understand the process and how to properly protect your deal, along with protecting any tenant/buyers you plan to sublease to, you ARE going to end up learning a very expensive lesson the hard way! For a few hundred invested BEFORE you just run out and attempt doing these on your own will be well worth the investment. Like the old saying goes, you can pay now, or you can pay later! Only paying later always ends up costing 10+ times more!

Check out Bronchick’s course at:

Re: Lease-Option Question - Posted by Michael

Posted by Michael on March 22, 2002 at 19:29:38:


I don’t see anything wrong with your idea. The only thing I would suggest is to find out what the comp’s on the T/H are to find the true market value. Also, I would only offer to take it for the balance she owes on her mortgage and if the deal makes sense, give her some moving money to get her where she’s going.
The concern about you not being on the deed and her not paying her mortgage and would it fall on her. Yes, it would fall on her and not you but, you have one problem, if you are sub-leasing it to a T/B you have an obligation to perform under your contract with them. So, how do you expect to give them clear title to the property when the orginal seller have lost the home to a foreclosure.
My advice, stay in control during the whole process, make all of your payments to the seller directly to their mortgage company, don’t learn the hard way.

That’s all from me

Michael, KY.

Re: One more thing Johnboy… - Posted by Dave

Posted by Dave on March 23, 2002 at 18:36:25:

This is also the situation I am in. I am considering doing straight options and retail flips. Problem is…most banks and lenders now require three month title seasoning. How can I go around this thing without doing lease/options?



Re: One more thing Johnboy… - Posted by JohnBoy

Posted by JohnBoy on March 24, 2002 at 02:36:38:

You either need to find lenders that don’t have a problem with it, which is getting harder to find these days, OR you will have to find buyers that have the cash to pay you your profit as an assignment fee and assign your option to them. Then they would close with the seller by drawing up a purchase agreement between them where there would be no seasoning problem.

Other than that you could consider taking partial profit in cash and hold a note for the difference. If the buyer doesn’t own any other property to secure the note against then you would have to settle for an unsecured note. That would be my last option, but if I only had the one buyer lined up by the time my option was to about to expire then getting something with a note is better than nothing.

Another way would be to get the seller to sign a performance mortgage to secure the option you have and list your profit amount in the performance mortgage. Then record it and just have your buyer enter into a new purchase agreement directly with the seller for the amount you would have sold to your buyer for. Then the lender would have a copy of a purchase agreement that shows the buyer is buying from the seller on title. When the lender checks title your performance mortgage would show up as a lien like a second mortgage and they would contact you to get a pay off amount. You just give them the amount of your profit as the pay off amount, which is the difference between the purchase price the buyer is paying VS. the amount of your original option price with the seller was. The title company will cut you a check from the proceeds at closing and you would sign over a release of lien so the buyer can get clear title. The only problem will be getting a seller to agree to signing a performance mortgage when you are only getting an option. But if you can get the seller to go along with that then your problem with seasoning is solved!

Re: One more thing Johnboy… - Posted by Houserookie

Posted by Houserookie on March 24, 2002 at 11:33:07:

There is another option that does not require taking an unsecured note or have buyers pay assignment fee.

And it works everytime.


Re: One more thing Johnboy… - Posted by Randy_OH

Posted by Randy_OH on March 24, 2002 at 13:24:26:

When I click on this link, I get an unrelated message from Houserookie. There seems to be a glitch in the program. You may want to repost your response to David H.