Saturday, March 22, 2008

Question of The Week: Lease Options and Repairs

I received a question from one of my mentoring students today, so I thought I would share my answer with you my faithful blog readers.

The question was this “can we, as lease purchase investors require our tenant/buyers to repair items that break or need maintenance during their option period?” The simple answer is Yes; if you structure it properly! The reason this question came up is that my student went to his local REIA club meeting, and heard an attorney say it was illegal to do so. It is only illegal if you include such language in the traditional residential lease, but since we are sandwiching the property, we always use 2 contracts – an option, and a residential lease. Within the confines of the option agreement we place language that states that repair/maintenance issues of x amount are the responsibility of the Optionee, and in order for them to be able to exercise their option down the road they must agree to the language of the contract. If they default they not only lose their option consideration, but they are on the hook for the repair and eviction procedures could follow.

I hope this was useful information.

James Gage