Tuesday, April 11, 2006

Lease/Options: Beware

by Osman Parvez


A couple of months ago, we attended an investor presentation by Colorado real estate attorney Oliver Frascona. It was one of the better real estate/law presentations we've seen and I came away with very high regards for Frascona.

Much of the talk dealt with lease/options and why they are a bad deal for owner-sellers in Colorado. In short, if the deal goes bad, Colorado courts will treat the situation like an equitable mortgage resulting in a very long foreclosure process. It will be much more difficult and time consuming than a simple tenant eviction and you probably won't be collecting much rent during this period.

Recently, a message came across the CAREI warning list about a lease/option scam currently underway. The email reminded me of Frascona's presentation, considering which, perhaps this investor got off lucky.

I thought I'd pass along the warning....


To: CS_CAREI@yahoogroups.com
From: "Joe Gilligan"
Date: Fri, 07 Apr 2006 22:47:19 -0000
Subject: [CS_CAREI] Beware !!!
Hi all. Just wanted to shoot a quick message to the group in the form
of a warning. Just had some tenant/buyers thoroughly trash one of my
houses to the tune of about $10K in damages and skip out. They even
tore out the plumbing and took it with them! After talking to
their "friends", relatives and former neighbors I do have a strong
suspicion that they will be hunting up another lease/option deal here
in town from another investor - so WATCH OUT. These folks are among
the best con artists I have ever come across. They look pretty good
on paper - but they will steal everything that isn't nailed down (and
lots of stuff that is also!). Their names are TAD AND JILL WALTON. If
they come your way run away fast. Also, if you have had recent
dealings with them (shown them a house, taken an application, etc.) I
would be VERY interested in any information you could provide that
would help me track them down so I can serve them papers!

Thanks in advance for any possible help in this regard, and I hope
this saves a fellow investor some real grief.

Joe Gilligan
719-291-4753
email: joe@HomeBuyerJoe.com




----
Like this analysis?    Subscribe to our client research report.     
Want to get blog updates via email?  Click HERE.       
Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

6 comments:

  1. could you clarify/explain what you mean by lease/options?

    ReplyDelete
  2. I was referring to situations often advertised as "rent to own."

    The owner finds a tenant/buyer and, through a variety of means, will structure it so that the buyer has the option to purchase the property.

    For a number of reasons, these types of structures can sound attractive to both parties. However, owners should be aware of the risks - particularly those with respect to local/state law.

    The situation Joe mentioned in his email could also occur in a plain vanilla rental. In a lease/option however, eviction could be much more difficult and time consuming.

    If you are concerned with how best to structure a lease/option, I recommend procuring the services of a local real estate attorney. Given the potential risks, it seems money well spent.

    ReplyDelete
  3. you need a seperate lease and option agreement. not a lease otion.

    ReplyDelete
  4. You're right, Anon. The common practice (in Colorado) is to sign both a contract to purchase the home and a lease.

    ReplyDelete
  5. I am tring to get info. I did sign both a lease and option ( 2 sepaerate contracts) The landlord broke the lease and option contracts I moved on the standing that as soon as we were moved and the home was in good shape all monies would be returned. Close to $4800 dollers. Now he wont even do that. All 4 parties that signed had first option to purcase after 24 mths. If he choose to sell to some one outside of the contract we were to be given written notice before hand. None of this was done. Instead he sold it to the other parties sons and the written notice was " I sold said property to so and so you have 30 days to vacate said prperty with less then half your monies returned". All I have found so far is lawyers that will help the landlord / seller but not tenat / purcaser. Any ideas on where to turn or should I just mark this as a expensive lease learned and not even try anymore? It has become very frustrating as a widow with 5 kids and am to point I should just stop. Any help would be greatly appriciated.

    ReplyDelete
  6. It sounds like you need legal advice. That can be expensive but if you qualify, you could try legal aid. They provide free legal advice on these sorts of matters.

    Colorado Legal Services: www.Coloradolegalservices.org
    or
    Legal Aid: . Phone: 303.449.7575

    espanol

    ReplyDelete