Lease-to-own Options Can Cut Both Ways
Robert S. Griswold | Steven R. Kellman | Ted Smith
This column on issues confronting renters and
landlords is written by Counselor of Real Estate and
Certified Property Manager Robert Griswold, host of Real
Estate Today! with Robert Griswold (10 a.m.
Saturdays on AM1130 - KSDO radio, or on the Internet
and by attorneys Steven R. Kellman, director of the
Tenants' Legal Center, and Ted Smith, principal in a law
firm representing landlords.
Q: Our tenant has a lease-to-own option on his rental agreement. To
date, he has not paid the rent on time, and has neglected to include
the agreed-upon late fee. What does the law say about our options to
declare him in default of the lease, and the lease-to-own option, and
retake possession of the property? We have sent him a bill for the
late fees due, certified mail, but he has not yet responded.
A: Smith: The landlord's perspective on options is that they are not a
good idea. Lease options benefit only the tenant -- not the landlord.
I do not recommend lease options to my landlord clients. Instead, I
encourage them to make a choice: sell the property, or lease the
property, but not both at the tenant's choice.
Arguably, the tenant is stalling because he can't make up his mind or
qualify for the loan, or both. Carefully analyze the tax aspects.
Further, I want you to take a careful look at your option and default
clauses in the lease. If the lease provides that the option can be
extended provided the tenant is not in default, then there exists no
rent to purchase when the rent is due and unpaid.
But, without this type of clause, the option may still be exercised
with proper notice, as per the terms of that provision. Even though
there are late charges and other expenses owing, the option can be
exercised unless the lease is declared forfeited by an unlawful
Once evicted and the lease forfeited, under ordinary circumstances,
the tenant will have no right to exercise the option.
Kellman: I agree with Ted that these lease/option-to-purchase
contracts are not a very good idea but I disagree with Ted in that I
feel these contracts benefit landlords and not tenants.
In fact, these contracts can easily cause tenants to lose a lot of
money. This happens when the tenant pays an extra nonrefundable option
fee or additional monthly payment toward the down payment.
If the lease is somehow terminated (e.g. by offering to pay the rent a
bit too late), the tenant may lose all that extra money paid over and
above the rent. Thus, a landlord may keep some of the purchase price
paid by the tenant and keep the home, too. Not a bad deal for the
landlord but awful for the tenant.
In your case, you should not have much trouble in declaring the lease
forfeited. All you need to do is proceed with legal action regarding
the nonpayment of rent.
Most lease/option contracts will provide that the option to purchase
is lost if there is a default of a material obligation in the lease
which, of course, includes paying the rent.
If the rent is not paid within the time allowed by law, the lease can
be declared forfeited which may result in the eviction of the tenants
and will most likely terminate any option to purchase the property.
Of course, any additional option money paid to you should be handled
as per the contract. Landlords and tenants should have any such
lease/option contract reviewed by an attorney before they sign.
My husband and I are senior citizens and have rented an apartment for
over four years. We are very private people and have a potential
problem with our dysfunctional, drug-abusing daughter. We will be
traveling extensively this summer and are worried that our daughter
will seek to gain entrance into our apartment.
Our daughter does not live with us and is not on our lease.
Nonetheless, she is extremely manipulative and may be able to convince
the owner to give her access. We really don't want to air our dirty
laundry with the owner. Do you have any other suggestions?
Griswold: Legally, your daughter has no right of access to your
apartment absent your specific authorization. It would be extremely
unwise for the owner to allow her to enter and they could be liable
for any loss.
Of course, the manager cannot be responsible should your daughter forcibly
break into your rental unit. I do suggest that you let the manager
know, in writing, the situation and that under no circumstances is
your daughter to be allowed access to the premises.
Prudent managers and rental owners will recognize this request and
will refuse to allow anyone, including the daughter, access to the
We rent an apartment in a small triplex that has three narrow garages
off a public alleyway. The narrow garage and driveway combined with
the size of our car requires us to back into our garage at an angle.
Up until recently, everything was fine. Now we have a new neighbor who
lets his friends park in front of his garage so that we cannot easily
get into our garage without honking the horn and waiting for someone
to move one or more vehicles.
Our neighbor's friends also frequently hang out in the driveway
working on their cars and disrupting our formerly quiet community. We
have asked the owner to post signs prohibiting parking in front of the
garages, but he is not willing to do this. Since he lives off-site, he
cannot see firsthand what we are faced with.
We are on a budget and cannot afford to move. What do you suggest?
Smith: I see a couple of reasons to have the car towed away. If the
vehicle is positioned on the public alley, it can be towed away for
that reason alone. Police can be contacted and the vehicle towed in
accordance with California's Vehicle Code.
If it turns out that the car is off the alley and on private property,
then turn to your landlord. He has the right to have the car towed
away since it is not unauthorized on his private property.
Most cities require that proper tow-away signs be posted in
conspicuous locations. These signs can be purchased.
YOU'RE A TENANT OR LANDLORD, the authors stand ready to
answer your questions in this column, although letters
cannot be answered individually. Write them at: Rental
Roundtable, Homes Section, San Diego Union-Tribune, P.O.
Box 120191, San Diego, CA, 92112-0191. Or you may e-mail
them at firstname.lastname@example.org
2000 Rental Roundtable
Robert Griswold and the Real Estate
Today! radio show strongly support the intent and the letter of all federal and
state fair housing laws. As a reminder to all owners and managers of real
estate, note that all real estate advertised is subject to the Federal Fair
Housing Act, which makes it illegal to advertise "any preference,
limitation, discrimination because of race, color, national origin or ancestry, religion, sex,
physical disability, or familial status, or intention to make any such
preference, limitation or discrimination." Additional state and/or local
fair housing laws may also apply. Be sure to inform all persons that all
dwellings offered or advertised are on an equal opportunity basis.
Revised and Updated -
Wednesday, April 26, 2006
Robert S. Griswold, CRE, CPM, CCIM,
PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
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