Questions about "lease to own"?

Question

I have a condo that I lease out, I want to sell this condo but want to sell it by means of "lease to own" can this be done?...

Example...

I lease this condo that I still have a mortgage on, I DO NOT own it outright, I want to sell it to Jim thou "lease to own" terms, meaning I will still retain the title/deed and the orginal mortgage. Say Jim decideds after a year he needs to move, can he then in turn "lease" or "rent" the condo out even thou he is still in a "lease to own" contract with me?

I think it equates to "sub leasing" but want to make sure there are not legal issues at stake here when MY mortgage company can come back and bite me in the butt..

Answer 1

I personally do not think that is an intelligent move because once you add more people into the equation, things get complicated quickly. Even with paperwork and contracts, court proceedings and lawyers cost money as well as time. You never know what position you will be put in when you make a deal. I wouldnt even dare try that until you own it 100%. Sub-leasing is a fairly shadowy path and can lead to other problems down the road, especially if you get into issues with the sub-tennant. Also, you are still ultimately responsible for the care of the condo, such as repairs, if that sub-tennant requires them. Be wary.

Answer 2

1. With a lease to own deal you are still the owner, you are still the landlord and you are still on title.

2. The renter will be on the lease. They will also have an option (assuming you use a lease and an option). They own the option and it can be recorded. That does not change the fact that you are on title.

3. The lease can have a restriction that sub-leasing is not allowed. This is generally better than allowing sub-leasing if you care about who is there.

4. As the landlord you are still legally responsible for the upkeep of the unit. All the major items to meet the health code (heating, hot water, roof that does not leak). As a condo many of the major systems are covered by the HOA so not a great burden on you. You can not force or even agree that the person leasing takes on such responsibility no matter what they agree to sign.

In summary there are issues but you are largely fine if you remember that you are the owner/landlord. You have not transferred title so the lender can not say anything. The HOA might have rules you need to deal with if you are renting the unit.

Answer 3

As a Realtor for 14 years in Texas, where attorney are seldom used to draw up the terms of a contract (I've never used one), this is the first time I'm recommending it - Have an attorney draw up your contract for you. Do this to make sure you do not trigger your lender's due on sale clause.

On so many contract for deeds, and lease to own contracts, the seller doesn't even realize that just selling the house by this manner may trigger the due on sale clause.

Answer 4

Lenders very rarely exercise the "Due on sale" clause. You are going to want the right documents in place just in case..but generally a lender wont want to rock the boat on a performing note. They just want money...not properties.

I recommend contacting Chris from http://scbuyshouses.com
He can partner with you and walk you through the deal as well as supply the lease agreement document your going to want As Well As A CYA(Cover Your A$$) document. Chris will also be able to help with the marketing strategies and negotiations process.