Does the tenant have a choice to pay the option premium?

I had a couple of interesting questions today on the model that we use.

The first was: Does the tenant have a choice to pay the option premium?

And the answer is:
No. The tenant doesn't really have a choice about the rent premium. You are essentially helping them save for the down payment. If you don't charge them a premium that they can get back, they won't be able to save for the down payment. They also have much less skin in the game and, as such, may walk on you.

The second question was: If taxes and condo fees go up a year into the agreement, would you raise the payments to the tenants (who are in rent-to-own) or can you do that?

Answer:
In our model we pay the property taxes. So any increase there is ours to eat. As for condo fee increases, you could pass them on to the tenant. In all of the condo deals we have done we are talking about increases of $10 a month so we don't bother given the short ( 2 or 3-year) duration of the relationship. When you ask "can you do that?", know that you can do pretty much whatever you want as long as you don't contravene the Landlord Tenant Act. And the tribunal prefers not to get involved in lease option details such as deposit, rent premiums, and condo fees. (Tribunal assumes that the landlord is responsible for the condo fees)

--Bob Hudson AKA "Lease to Own" Bob

Anything special in the lease option contract?

I have been asked many times if we have anything special in our lease option contract.

Here are two answers: "Normal" and "Since bad tenant".

Normal - the lease option agreement is essentially a rental contract with the terms of a possible future purchase laid out. As a rental contract it needs to spell out the conditions for tenancy, including initial deposit amount, monthly rent amount, duration of the agreement, behaviour expectations, and terms eg. who pays for utilities, etc. The possible future purchase indicates the date and future strike price at which we will sell to the tenant/buyer - if the tenant/buyer opts to purchase. They do not have to, but will forfeit accumulated rental credits if they do not.

Since bad tenant - we thought we were doing the right thing by clearly delineating all of the cost elements of the relationship eg. initial payment, monthly base rent, monthly rent premium. When we ended up at the Landlord and Tenant Board, the LTB member was not at all interested in any of the numbers except for the agreed monthly rent. This meant that the only way to get compensation for the rent premiums (and an amount of the initial deposit still owed) was to go to Small Claims Court. Such things are beyond the jurisdiction of the LTB. We would have been better to bundle as much as we could into the stated rent.

--Bob Hudson AKA "Lease to Own" Bob

Complements of the Season to One and All.

If you're going to be thinking, you may as well think big.
--Donald Trump

Earn $500 Learn about Lease-To-Own (Brampton)

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When: Tuesday November 27, 2007 at 7:00 P.M.

Where: RE/MAX Real Estate office, 2 County Court Blvd., Suite 150, Brampton, ON. It is next to the Swiss Chalet on Highway 10, South of Steeles

Please RSVP to ebrahim@bds.ca or thomaswong@rogers.com

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--Mary Kay Ash

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Call EBRAHIM at 416-671-0837 or THOMAS at 416-806-9568, or send us an email.