QOur tenant has a lease-to-own option on his rental agreement. To date, he has not paid the rent on time and has neglected to include the agreed-upon late fee. What does the law say about our options to declare him in default of the lease, and the lease-to-own option, and to retake possession of the property? We have sent him a bill for the late fees due, certified mail, but he has not responded.

ALandlords' attorney Smith replies:

The landlord's perspective on options is that they are not a good idea. Lease options benefit only the tenant, not the landlord. I do not recommend lease options to my landlord clients.

Instead, I encourage them to make a choice: Sell the property or lease the property, but not both at the tenant's choice. Arguably, the tenant is stalling because he can't make up his mind or qualify for the loan, or both.

Carefully analyze the tax aspects. Further, take a careful look at your option and default clauses in the lease. If the lease says the option can be extended provided the tenant is not in default, then no rent-to-purchase option exists when the rent is due and unpaid. But without this type of clause, the option may still be exercised with proper notice, as per the terms of that provision. Even though late charges and other expenses are owed, the option can be exercised unless the lease is declared forfeited by an unlawful detainer action. Once a tenant is evicted and the lease forfeited, under ordinary circumstances, the tenant will have no right to exercise the option.

Tenants' attorney Kellman replies:

I agree that these lease/option-to-purchase contracts are not a good idea, but I disagree in that I think these contracts benefit landlords and not tenants.

In fact, these contracts can easily cost tenants a lot of money. This happens when the tenant pays an extra nonrefundable option fee or additional monthly payment toward the down payment. If the lease is somehow terminated (because the tenant paid the rent late, for example), the tenant may lose all the money paid over and above the rent.

Thus, a landlord may keep some of the purchase price paid by the tenant and keep the home, too. Not a bad deal for the landlord, but awful for the tenant.

In your case, you should not have much trouble in declaring the lease forfeited. All you need to do is proceed with legal action regarding the nonpayment of rent. Most lease/option contracts will provide that the option to purchase is lost if there is a default of a material obligation in the lease, which, of course, includes paying the rent. If the rent is not paid within the time allowed by law, the lease can be declared forfeited, which may result in the eviction of the tenants and will probably terminate any option to purchase the property. Of course, any additional option money paid to you should be handled as per the contract.

Landlords and tenants should have any such lease/option contract reviewed by an attorney before they sign.

My husband is affiliated with the federal government and his job is classified as "mission essential." He has been in this capacity for more than 10 years. We have moved frequently and always must rent.

To our delight, he is being transferred to a new position that is classified as "non-mission essential," and we will be relocating close to our original home in another state. We are delighted that this new position will not require any more moving, but we have a problem because our original home is being rented. The current lease has six months remaining, and the renters have paid their rent on time and have not created any problems.

My husband was given his military orders just three days ago. We had no idea this move would take place, as we were told we would be moving back next year. But things have obviously changed, and we want to move back into our home.

When we notified our property manager of the current situation, she became hostile. She refused to discuss moving the tenants out and ended her conversation with, "I handle the legal matters for this office, and this office is not breaking the lease." What can I do?

Property manager Griswold replies:

You must honor the tenant's lease. Based on the facts that you present, I see no circumstances that would give you the legal right to terminate a valid and binding lease with your tenants.

The fact that your husband is in the military and has a transfer to either a "mission essential" or a "non-mission essential" position has no bearing on the rights of the parties under the valid lease agreement.

Even if you were to sell the property, the lease would still be in place, and a new owner would not be able to force your tenants to leave.

You may want to consider buying the tenants out of the lease or renting another home until the lease expires.

In hindsight, clearly you should have put a clause in the lease that would have given you the ability to terminate the lease if you wanted to move back in under these or similar circumstances. This clause also would have spelled out the terms of such a possibility, such as required notice and any compensation due the tenants.

By the way, the "military clause" is often misunderstood and does not automatically allow military personnel out of leases just because they have military orders. You can't have a long-term lease (either as the tenant or the landlord) and then tear it up just because your situation changes. That is why it is better to use a month-to-month agreement if there is ever any uncertainty about the length of a particular tenancy.

Be thankful that moving is soon going to be a distant memory. You can also be glad that you have a good tenant who is paying the rent on time and taking care of your home.

That is every landlord's goal.

This column on issues confronting tenants and landlords is by property manager Robert Griswold and San Diego lawyers Steven R. Kellman, director of the Tenants Legal Center, and Ted Smith, principal in a firm representing landlords. E-mail your questions to Griswold at rgriswold.inman@retodayradio.com. Questions can't be answered individually.

Copyright 2003 Inman News Features

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