Rent to Own Question

[fumbrunner]

A quick question to the RTO gurus on the board. If a buyer backs out of a RTO agreement, does the landlord/seller keep both the option payment and the rental premium or does the rental premium get returned.

Thanks.

 

[tonypeters]

It ultimately depends on how you have your Lease Purchase Agreement structured. My agreements are structured in such a way that if the Tenant/Buyer defaults, they forfeit their deposit and option credits. However, with that said, depending on the situation, you may want to provide some "flexibility" and review each (default) situation on a "case by case" basis.

Remember; the object of the exercise here is to create SUCCESS for your Tenant/Buyers, not set them up for FAILURE! There is a BIG difference between the two! Hope this helps?

QUOTE (fumbrunner @ Oct 5 2009, 09:42 AM) A quick question to the RTO gurus on the board. If a buyer backs out of a RTO agreement, does the landlord/seller keep both the option payment and the rental premium or does the rental premium get returned.

Thanks.

 

[GoRentFreeFast]

QUOTE (tonypeters @ Oct 5 2009, 12:09 PM) It ultimately depends on how you have your Lease Purchase Agreement structured. My agreements are structured in such a way that if the Tenant/Buyer defaults, they forfeit their deposit and option credits. However, with that said, depending on the situation, you may want to provide some "flexibility" and review each (default) situation on a "case by case" basis.

Remember; the object of the exercise here is to create SUCCESS for your Tenant/Buyers, not set them up for FAILURE! There is a BIG difference between the two! Hope this helps?


I agree entirely with Tony. As with any real estate venture solid agreements are key. Our occupancy agreement states the initial option fee and monthly credits are the investors if the occupant vacates the property before the end of term however, our goal is to enable the occupant to purchase so (as Tony put it)...”flexibility” by the investor is encouraged.

 

[fumbrunner]

Thanks for the prompt response.

 

[AndyLuchies]

If the contract does not CLEARLY state that the credits (and deposit/downpayment) are non-refundable (preferably at least twice, with tenant initials beside), then you could be in trouble if the tenant tries legal action. There must be no doubt to anyone reviewing the contract.

However, if you`re simply wondering how to set up the contract, its very common to have credits non-refundable. It insures that the tenant is committed from day one, knowing that he`s losing money every month if he backs out later.