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Lease Options Common Questions & Answers

We will be adding a new detailed answer to many of the common Lease Options questions that we are frequently asked each month, so keep checking here for your one-stop shop to Lease Options questions and queries.

1. What happens if the seller dies?
   Property passed in accordance with their will or rules of intestacy. Buyer can still exercise their option.
    
2. What happens if you, as the option holder, die?
   Need to check the contract, for example - contract may state that the seller can terminate immediately on the death of buyer or winding up (if corporate body)
    
3. What happens to the option agreement if the seller goes bankrupt?
   Need to check contract, for example buyer can terminate the agreement if seller goes bankrupt.
    
4. Who is responsible for the tenant if the seller becomes bankrupt?
   Under the Management Agreement if that is terminated then the owner therefore trustee in bankruptcy. (Risk in the first 2 years that there may be a claim to set aside)
    
5. What happens if the seller refuses to honour the option agreement?
   The option will be registered on the property as a restriction and notice therefore difficult for seller not to honour the option agreement but can possibly get it set aside if can prove "undue influence".
    
6. Do I have to use a solicitor?
   You do not have to but strongly recommend it as lease options can be technical and many solicitors themselves may not fully understand it. Also if you do not use a lawyer risk of set aside for undue influence increases significantly.
    
7. Do I need to appoint a solicitor for the seller?
   Strongly recommend the seller does to protect the buyer against "undue influence".
    
8. What should I do if the seller insists on using their solicitor but this solicitor advises the seller not to sign the Agreement?
   Find out why and then address the problem. Is there a genuine reason or does the solicitor not understand it? It is always a good idea to have a solicitor acting for the seller that understands lease options.
    
9. Does the option agreement need to be registered?
   Yes, absolutely.
    
10. What happens if you fail to honour your part of the agreement and not pay the seller's mortgage?
    Need to check the contract. At Alexander Lawyers we separate the option agreement from the management agreement. If there is a breach of the management agreement there is no question over the option agreement being valid - but a claim would be made for damages under the Management Agreement.
     
11. Am I able to extend the option period?
    There is no reason why you cannot renegotiate the terms of the option.
     
12. What happens if the seller fails to keep up with their contributions?
    See 10 above.
     
13. Who pays the landlord insurance?
    Need to check the contract. Whoever pays it you need to make sure a valid policy is in place.
     
14. Whose responsibility is it if the tenant trashes the place?
    Check the Contract - normally this would be your responsibility as you are responsible for the tenant - this illustrates the importance of "hands on" management.
     
15. Does the seller need to notify the mortgage lender about the option?
    No - but they would need their consent to let.
     
16. Is it possible for someone who's not the owner of the property to pay directly to the mortgage company?
    Yes - subject to appropriate authorities being dropped into place
     
17. Can the seller remortgage or get further drawdown?
    Not without the buyer's or buyer's solicitors' consent - see contract.
     
18. Can I add clauses directly to the Option Agreement?
    Both parties can renegotiate the terms at any time but only by mutual agreement.
     
19. Can I back out of the deal once the option agreement has commenced?
    Yes, as the buyer you are not obliged to purchase the property but you would have responsibilities under the Management Agreement.
     
20. What happens if the interest rate goes up?
    Refer to the contract. For example, can you make the seller/owner responsible for any additional payments?

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