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Use caution in Lease Purchase transactions.



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On the recommendation of our attorney, we structure our lease purchase transactions as options to purchase. She has had cases where a purchaser in a lease purchase defaulted and a judge ruled that the purchaser had an equity or ownership interest in the property. Rather than simply evicting a tenant in default. The seller must foreclose on the purchaser. By structuring the agreement as an option to purchase with a concurrent lease we avoid the potential for purchaser to claim an equity interest.

Madison County Courthouse, Huntsville AL
The attorney also stated that the earnest money paid by the home purchaser must be limited to $2,000 - $3,000. She has seen judges rule that large earnest money payments to the seller by the purchaser created an equity interest for the purchaser. The judge ruled that the agreement was an agreement to purchase and seller had to go through a long and expensive foreclosure process.

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Dallas Mill water tower Huntsville AL

Downtown Huntsville street scene

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