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Barrister
Barrister, Lawyer
Category: Real Estate Law
Satisfied Customers: 34723
Experience:  16 years real estate, Realtor. Landlord 26 years
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Five year lease and purchase agreement were signed in the

Customer Question

five year lease and purchase agreement were signed in the state of Nevada in 2013. 30,000 dollars was given at signing 27,000 for deposit and 3,000 earnest. If the option to purchase within the five years is exercised all 30,000 would be applied to principle. I am two years into the agreement with three years of rent to be completed at 1,150 a month. Things have changed and I am no longer interested in the purchase let alone living in Nevada for the next three years. The landlord says he is going to keep all 30,000 for the rest of the rent due on the lease hints why I am seeking professional help. What are the best financial choices I can make going forward to make this separation as seamless as possible. Thank you!
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Barrister replied 1 year ago.

Hello and welcome! My name is ***** ***** I will try my level best to help with your situation or get you to someone who can.

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Is this a residential or commercial lease w/ option?

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Was the 27K to be used strictly as a refundable security deposit if you completed the 5 years and decided not to purchase?

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Is the contract assignable?

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At the agreed on purchase price, is the building worth more than that price?

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thanks

Barrister

Customer: replied 1 year ago.
Residential with option.The 30,000 was used as Fallows under the lease agreement.
The tenant / buyer has tendered 30,000 dollars as option price and this payment will be applied to the total purchase price if later excersised.
Under purchase agreement it is 27,000 as additional deposit and 3,000 for earnest money.
I have tried to find anything that states what happens to the deposit if there is a default and I can't find anything. It says for any addition remarks put in section 28 and the only thing about the deposit in 28 says that the deposit will not be placed in escrow.The agreed purchase price is 115,000 with thirty thousand tendered at the end of the lease would bring the purchase price to 85,000. The Las Vegas market is up and down and an appraisal has not been done so I do not know what it is worth.Thank you!
Customer: replied 1 year ago.
Not sure if it matters but the original hike owner that signed our lease and purchase agreement sold the home and we do not have w lease with the new owner.
Customer: replied 1 year ago.
Home*
Expert:  Barrister replied 1 year ago.

Ok, if this was a lease with option, if you breach the contract, then the seller/landlord would have a duty to mitigate his damages by trying to re-rent the property as soon as possible. Then he can only retain as much of the deposit to compensate him for any lost rent until he does rent it again.

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Once he finds a new tenant, then he would have to refund any balance that was characterized as security deposit.

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My concern is that he may try and call the $27K the option purchase price where you paid $27K for the right to buy the house for $85K at the end. If you didn't exercise the option, then it just expires and you don't get your money back..

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So this is going to depend on whether the 27K was a "security deposit", which would be illegal to have that much of a security deposit under AZ law because it is limited to 1.5 times the rent, or whether it is the purchase price for the option, which is what I am pretty sure he will claim it is..

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If it is a security deposit, then you get it back minus any lost rent until he re-rents. If it is just a deposit on the purchase price or the purchase price of the option itself, then you are stuck.

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With that said, if the house would be worth over the $115K, then you could try and sell the option to someone else by assigning it to them in return for them paying you the $30K, or $27K, or whatever you could get out of it. Then at the end of the lease they could purchase it for the $85K.

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But no, any subsequent purchaser would have taken it subject to your option to buy it at the end of the lease.

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So rather than fighting about it in court, I think I would first see if there is any interest in someone buying you out of the contract with you assigning it to them... How you would advertise this, I don't have any idea because since you aren't the owner, you can't really use a realtor..

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thanks

Barrister

Customer: replied 1 year ago.
In Nevada they do have a law that requires the owner to re rent and if he can't then the most he is allowed to sue for is 10,000 dollars. I don't know if this is 100% accurateWould it be easier if I gave you a copy of the lease. Once again I am still planning on making payments as planned and do not want the owner notified I am just trying to educate my self on the best possible plan of action.Thank you
Customer: replied 1 year ago.
He has stated in text that if we do leave that he will keep the 30,000 as default for not completing the 5 years of rent but that is not written anywhere in the contract. If he is claiming to keep the money because of our lease agreement is it safe to assume there is nothing in the purchase agreement that would entitle him to the 27,000?
Expert:  Barrister replied 1 year ago.

I am not sure that is entirely correct as there is no set maximum amount that a landlord can sue for generally. There are limits in certain courts, like in small claims court you can only sue for up to $10,000, but if the landlord wanted to hire an attorney and sue in a higher court, there is nothing that would prevent that.

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So if you are talking about the small claims court limit, then yes, it is $10K.

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If he is claiming to keep the money because of our lease agreement is it safe to assume there is nothing in the purchase agreement that would entitle him to the 27,000?

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It all depends on how the $27K was characterized... If he charged you $27K to buy the "right" to purchase the house for $85K, then you just bought the right to do so. If you don't, then he still keeps the $27K because it is up to you whether or not to exercise the option contract at the end.

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But if it was a "security deposit", then you would be entitled to whatever was left after he re-rented.

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So the seller/landlord is going to argue it was an "option purchase price" and you would have to sue him in a higher court than small claims due to the amount and argue that it was a security deposit. Then a judge would make the final decision.

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thanks

Barrister

Customer: replied 1 year ago.
what is my best plan of action? Are you able to review the lease? If there is an additional cost for that I can pay it. Thank you
Expert:  Barrister replied 1 year ago.

I can't tell customers what to do because I am not legally representing you, only a local attorney can do that.... I can just tell you what your options are.. You have to make the decision about whether to try and sell the option to someone else, or stick with it, or breach and then see if you end up having to sue the seller/landlord to try and recover the $27K.

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I can't review legal documents for customers as again that is something that a local attorney who would be representing you would do. I can just provide legal information so as to give you the ammunition you need to make the best choice possible for you personally.

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thanks

Barrister