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Dear Mr. Feichthaler:
I have been renting to a couple for several years now, and they have indicated an interest in purchasing the house. They have poor credit and cannot obtain a loan to purchase. Can I provide them a lease where a portion of the payments go toward a down payment, then sell to them at a future date?
--Jacquelyn D.
Dear Jacquelyn,
We see many clients that have a similar situation -- a well-established relationship with a tenant where the parties wish to expand to full ownership. What you propose is a good alternative, and is called a lease-option. Your lease can be drafted to provide for a portion of the lease payment to go toward a down payment. After that payment amount is reached, the tenant / potential buyer can proceed with a purchase, using the amount allocated toward the house.
At the time of the purchase, the tenant may have improved their credit, which will allow them to obtain a loan from a bank. Or, you may be providing them financing, based on the original lease-option agreement. In that case, you would act as the bank, with your tenant / buyer paying you monthly mortgage payments. Along with the lease option, a separate contract for the purchase itself is normally signed at the same time, with both the lease-option and the purchase agreement cross-referencing each other.
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Eric P. Feichthaler has lived in Cape Coral for over 35 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Museum of History, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at eric@capecoralattorney.com, or 239-542-4733.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.