T/B does have an insurable an an equitable interest IMHO. To the limits of your specific contract.
Equitable Title: The interest held by a vendee under a land contract; the equitable right to obtain absolute ownership to property when legal title is held in another¹s name.
[ Edited by getitqwik on Date 11/27/2005 ]
The key is to have an Option that unequivocally states that the T/B understands it does not convey equitable interest and to further reinforce that by barring assignment of the Option (the T/B can buy but cannot assign the Option or re-sell the property). Still, courts are unpredictable, so it is always good to stay out of them.
[addsig]
Do you literally state that "this contract does not convey equitable title" on the contract as one of the terms. I have a contract that does state they cannot assign. Is this sufficient?
The two are mustually exclusive. I have a Clause for nonrefundable Option Consideration, a Clause for nonassignability, and several others, and then I put this above the signature line in all bold and caps:
TENANT/OPTIONEE UNDERSTANDS AND AGREES THAT THIS OPTION IS NOT CONTINGENT UPON TENANT/OPTIONEE OBTAINING FINANCING FROM A LENDER OR FOR ANY OTHER REASON AND THAT THE FAILURE OF TENANT/OPTIONEE TO PURCHASE SAID PROPERTY BEFORE THE EXPIRATION OF THE OPTION TERM WILL RESULT IN THE LOSS OF ALL MONIES PAID, AS WILL THE DEFAULT OF ANY OF THE COVENANTS OF THE LEASE AGREEMENT, AND TENANT/OPTIONEE FURTHER AGREES THAT THIS OPTION IS NOT AN AGREEMENT FOR DEED OR ANY FORM OF OWNER FINANCING, NOR DOES IT CREATE AN EQUITABLE INTEREST OF ANY SORT, BUT THIS OPTION IS SIMPLY A RIGHT TO PURCHASE SAID PROPERTY UNDER SAID TERMS AND CONDITIONS, WITH SAID LIMITATIONS, AND UNDER SAID TIME LIMIT.
I also have two blank lines where each T/B writes in their own handwriting: "I fully understand that all money I pay is nonrefundable."
[addsig]
I have a couple other questions that I would be greatly appreciative if you answered.
When a T/B pays an option consideration AND if we give rent credits, how does this apply to obtaining future financing? Do lenders recognize these "credits"? Will the T/B have to pay another down payment to obtain financing OR is the option consideration considered AS the down payment?
And...
How does insurance work in a L/O? Are we put down as loss payee? Does the owner need rental insurance? Do I need to have insurance? How does it work?
The lenders are only interested in 12 canceled checks and an Option Agreement. The Option Agreement (unilateral) functions as a Purchase And Sale Agreement (bilateral) when exercised. The T/B signs almost anything (motivated Buyers), although your Contracts should be simple and written at an 8th grade reading level (in case it goes to court). I have never had a T/B complain about anything in my Contracts.
[addsig]
T/B does have an insurable an an equitable interest IMHO. To the limits of your specific contract.
Equitable Title: The interest held by a vendee under a land contract; the equitable right to obtain absolute ownership to property when legal title is held in another¹s name.
[ Edited by getitqwik on Date 11/27/2005 ]
In My Humble Opinion
The key is to have an Option that unequivocally states that the T/B understands it does not convey equitable interest and to further reinforce that by barring assignment of the Option (the T/B can buy but cannot assign the Option or re-sell the property). Still, courts are unpredictable, so it is always good to stay out of them.
[addsig]
Leaseoptionking,
Do you literally state that "this contract does not convey equitable title" on the contract as one of the terms. I have a contract that does state they cannot assign. Is this sufficient?
The two are mustually exclusive. I have a Clause for nonrefundable Option Consideration, a Clause for nonassignability, and several others, and then I put this above the signature line in all bold and caps:
TENANT/OPTIONEE UNDERSTANDS AND AGREES THAT THIS OPTION IS NOT CONTINGENT UPON TENANT/OPTIONEE OBTAINING FINANCING FROM A LENDER OR FOR ANY OTHER REASON AND THAT THE FAILURE OF TENANT/OPTIONEE TO PURCHASE SAID PROPERTY BEFORE THE EXPIRATION OF THE OPTION TERM WILL RESULT IN THE LOSS OF ALL MONIES PAID, AS WILL THE DEFAULT OF ANY OF THE COVENANTS OF THE LEASE AGREEMENT, AND TENANT/OPTIONEE FURTHER AGREES THAT THIS OPTION IS NOT AN AGREEMENT FOR DEED OR ANY FORM OF OWNER FINANCING, NOR DOES IT CREATE AN EQUITABLE INTEREST OF ANY SORT, BUT THIS OPTION IS SIMPLY A RIGHT TO PURCHASE SAID PROPERTY UNDER SAID TERMS AND CONDITIONS, WITH SAID LIMITATIONS, AND UNDER SAID TIME LIMIT.
I also have two blank lines where each T/B writes in their own handwriting: "I fully understand that all money I pay is nonrefundable."
[addsig]
Leaseoptionking,
I have a couple other questions that I would be greatly appreciative if you answered.
When a T/B pays an option consideration AND if we give rent credits, how does this apply to obtaining future financing? Do lenders recognize these "credits"? Will the T/B have to pay another down payment to obtain financing OR is the option consideration considered AS the down payment?
And...
How does insurance work in a L/O? Are we put down as loss payee? Does the owner need rental insurance? Do I need to have insurance? How does it work?
Thanksabunch!!!!
The lenders are only interested in 12 canceled checks and an Option Agreement. The Option Agreement (unilateral) functions as a Purchase And Sale Agreement (bilateral) when exercised. The T/B signs almost anything (motivated Buyers), although your Contracts should be simple and written at an 8th grade reading level (in case it goes to court). I have never had a T/B complain about anything in my Contracts.
[addsig]