Re: They are Dead In Texas… - Posted by WAREIA
Posted by WAREIA on March 09, 2007 at 10:50:59:
Although Arizona hasn’t (YET) outlawed Lease Options, they do have on the books some interesting and dangerous legislation to discourage investors from participating in such schemes.
Based on my conversations with Legislators and RE Attorneys in Texas, the new Texas legislation, as of Sept 06, has some of it’s foundations in the Arizona Legislation. The AZ legislation simply states that a Leasee MAY have an Equitable Interest in the Property IF any one of five things exsist in the contract/s.
If any one of these five things exsist it means that… One; you can’t evict them, you must foreclose, Two; your property is exposed to all of your Tenants legal messes (Bankruptcies, Divorce, etc.) and actions including the ability for a Judgement Creditor to place a lien on your property, which is now considered your Leasees property.
I actually spoke with an Eviction Judge in AZ that before he was the Judge, helped sponsor Arizonas Lease Option Legislation. He was consulted on the Legislation that passed in Texas last Sept.
Here are the five things, that if ANY one of them exsists, MAY give a possible claim of equity in the property to the Leasee.
- A Pre-Determined Purchase Price or Buyout
- An Option Fee or Deposit of more than 1.5x the monthly lease
- Crediting an Option Deposit or part of the Rent to a future Purchase or dicounted buyout
- Requiring the Tenant to do ANY maintenance
- The exsistance of a Lease and an Option held by the Tenant regardless if its one document (a Lease Purchase) or two (a Lease with seperate Option Agreement)
It is also interesting to know that AZ Legislation is being used all over the country in the form of Case Precedent against Owners and Landlords when attempting to evict non-paying tenants to forestall eviction.
I am following a case rihgt now in another State with no specific LO legislation on the books but where they are using AZ legislation to keep the tenant from being evicted because a claim of equity exsists. The Eviction Judge had dismissed the original Eviction while a court of equity heard the claim. The court of equity (in small claims court) just ruled that YES, a claim does exsist because of the deposit, rent credit and pre-determined purchase price (a delayed sale). It has now gone back to the Owner and his Attorney for them to take a different action.
Yes the Laws are changing all over the country. For example. The city of Cincinatti has passed what is called and Anti-Preditory Lease Option Law.
You could always get in to a new house for less than renting regardless of your location.
That is true. But it is not true that it makes it hard to cash flow. You just need to know how to structure your deal to “Add Value” enough to get much better than Fair Market Rents.
Un-informed and un-educated Investors and Landlord have reduced “rents”.
Trying YES. Zag NO. Just use the exsisting laws on the books to do safe and legal transactions. The “market” has no idea what they want except affordable housing and Value. There are Ethical, Legal and Affordable ways to accomplish this and give them what they want.
Thats exactly the point to this legislation. The Tenants AREN’T “just renting”. A Lease Option is considered by Texas, AZ, UT, OH and many others to be exactly what it is… A Delayed or Diguised Sale. It IS Owner Financing and there in is the problem.
As usual, I suspect this post won’t stay up for long because it is not information the Gurus who sell Lease Option Courses want you to see. I have shared the solution many times here and it is continually deleted so I won’t do that any more. I do at least two deals per month in Texas and no, I’m not going to share anymore because when I do, the ones I share it with just mess it up and don’t follow directions, probably because it’s too simple and how can something be that simple?