Option Consideration and Eviction!!! - Posted by SCook85

Posted by Rob FL on March 22, 1999 at 05:43:34:

However, as far as money goes, tenants are one of the big categories that can get help through legal aid. They might be able to get a lawyer free of cost.

Option Consideration and Eviction!!! - Posted by SCook85

Posted by SCook85 on March 21, 1999 at 20:52:47:

I wanted to find out what others experiences have been with taking a substantial option consideration from someone they have to evict for not paying rent in the case of a lease option.

Does the court take into consideration the amount the Tenant/Buyer put down and hold that against the landlord/seller? In other words do they take the tone of “You mean landlord, you took $XXXX from this person and you want to evict them for being late?”

When I do this type of deal I have a stand alone Option agreement, a stand alone lease, and a stand alone contract. I do this to treat the Option to Purchase as a separate transaction from the lease so that the Option consideration can not be linked to the lease. Does anyone else do this? Have you had situations where this backfired or did not work in your favor? Is it advisable to do the transactions this way?

I’m just looking to cover my a**. Let me know what you think.


Re: Option Consideration and Eviction!!! - Posted by JPiper

Posted by JPiper on March 22, 1999 at 11:37:39:


I don’t think you’re going to find an absolute answer to your question?..and the answer may be somewhat state specific in any case. But a few comments.

First, taking “substantial” option consideration I have found helps to cause the tenant to make the payment?.it helps to cause the tenant to establish the payment of his monthly rent as a priority. So my first point is that “substantial” option consideration is going to reduce the number of potential evictions to begin with.

Second, in my case I carefully screen the tenant. One of the things you’re looking for is whether his rent has been a priority in the past?..as opposed to his car payment or his credit cards. I also look for the stability of his income, and whether the proposed payment when considered with his other bills is reasonable. These two factors are quite important, and will reduce the number of potential defaults in the payment.

Third, I am an active manager. This means that I don’t let ANY time go by without personal contact with the tenant if he misses a payment. I think this is quite important as well. The institution handling his credit cards or his car payment is not going to be nearly as active as I am. My actions are going to hopefully teach the tenant that he is required to view his payment with me as a priority.

In the 10 years or so that I have done lease/options as a seller I have had no evictions. I have had some tenants leave in the middle of the night (guess they knew they would have to face me and didn’t want to). I had one tenant call me and explain she couldn’t afford the payment anymore. In these cases I was not forced to evict, and there was no question about the option consideration.

My belief is that part of the success in a lease/option has to do with how it is presented upfront. In my case, I make it very clear upfront how tough I am going to be in terms of collecting rent. I also explain why it’s in their self-interest that I be tough, and that they adhere to the payment schedule. Almost without exception the people I have dealt with have credit issues. I explain that when we go to get the loan, we will need to present proof of timely payment?.that this will be an important consideration by the lender. We are going to use this timely payment as an offset to some of the past negatives on their credit report. Timely payment is also going to be linked to whether they get their monthly rent credit as well. Complete and truthful disclosure upfront regarding the contract is VERY important in my view.

In the absence of the tenant’s ability to get a loan, I am willing to extend the contract. I am willing to bend over backwards to help them get to the point where they can get a loan. The only thing I won’t go along with is non-payment?.and I let them know that upfront.

Having said all this, it’s at least possible that an equitable title claim could be presented in a court. There’s a theory that having separate lease and option documents will help to mitigate this claim. Whether this is true or not I suspect will vary depending on the court. But certainly the more your deal looks like a rental, the less likely the judge is to rule in that manner. In the last 10 years I have not had this situation present itself to me (not that this means it won’t). I’m also not aware of any situations where t

2 cents worth… - Posted by Bo (GA)

Posted by Bo (GA) on March 22, 1999 at 09:09:38:

…of observations (not advise).

  1. I put in my option agreement that a) the option fee is non-refundable and b) the option becomes null and void if the rent is late. This may help.

  2. I spent last Thursday in Dispossessory court (For educational puposes only) and of the 40 cases I listened in on, only one was a Lease with a purchase option. In that case the tenant claimed that certain repairs had not been made (#1 defense in all the cases) and the purchase option was, although mentioned by the judge, not an issue at all. This could also have been because the tenant did not bring it up.

Georgia is a landlord-friendly state, and depending on where you live (even in what county, or which judge!), your result will vary greatly.

Bo (GA)

Re: Option Consideration and Eviction!!! - Posted by Millie I.

Posted by Millie I. on March 22, 1999 at 24:59:26:


I asked my lawyer the same question.

He said that if the tenant leaves willingly, or does not contest in court, I’ll be able to evict her. But if she brings per own lawyer, or claims that she has equitable interests on the property, the judge may throw the case out, and tell me to foreclose her.

My lawyer recommends that I work with the tenant, give her a chance to catch up, or pay her part of the money back and ask her to leave.

Hope this help,
Millie I.

seems to me… - Posted by chris

Posted by chris on March 22, 1999 at 24:28:41:

that if they didn’t have the money to pay you the rent, they sure as heck aren’t gonna have the dough to bring a lawsuit! sounds like you have covered yourself about as well as you can…from what i know at least(and that ain’t saying much) you may wish to say to them, “bring it on baby!” on second thought…keep that one to yourself.

just my .02

ps-congrats again on your award!

Re: Option Consideration and Eviction!!! - Posted by Bill K. (AZ)

Posted by Bill K. (AZ) on March 21, 1999 at 22:29:32:

It sounds like you’re doing all the right things. Keeping the purchase portion of the transaction separate from the lease portion is the best you can do. Of course, this does not keep an evicted, hence irritated, tenant/buyer from suing you for their option consideration and rent credit. But, I understand that the courts MAY look more favorably on the situation if the tenant/buyer truly understood what they were getting into when they signed all those papers. And, having separate agreements makes it much more difficult for the tenant/buyer to say that it was confusing to them, or that you took advantage of them, as when all of the details are in one agreement.

Bill Bronchick recommends this process as well. I don’t believe that it’s “fool proof”, just the best way to go.

Hope this helps.

Bill K. (AZ)

Re: Option Consideration and Eviction!!! - Posted by Laure

Posted by Laure on March 22, 1999 at 21:16:23:

I just got Bronchick’s Option contracts and have already used two of them ! I agree… the contracts covers it all. Great documents !

Laure :slight_smile: