Texas Lease Options: Deciphering the Legal Jargon

So I have been reading into the Texas Property Code along with a book I bought Texas laws on Lease Options to figure out how to do it without violating any laws. Hehe, Texas has a lot of red tape to wade through.

It states an option fee cannot be forfeited due to late payments. Would this also encompass complete non payment/ eviction?

It's full of riddles and a huge process (you have to divulge the the lender, address, phone, loan balance, principal/ interest itemized before they sign any contract and then every month after they have moved in for example) but I'm reading and rereading it and will be talking with an attorney to make sure my contracts are straight before I ever do anything. Any feedback would be appreciated thanks!

Edit - It also states that you have to give 30 day opportunity to cure any defaults on contract before you can do anything. Does this mean I would have to wait 30 days before I could even start the eviction process?

Edited: 02/12/2011 at 11:52PM by Account Closed

Bryan Hancock

Real Estate Investor · Austin, Texas

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Feb 13 '11, 12:04 AM

IMO if you write an executory contract in Texas for longer than 6 months you are asking for trouble. Just give the tenant/buyer the deed and foreclose if you have to. This is MUCH easier than trying to tap dance around the lease/option laws.

I can point you to several attorneys in Texas that do this all day long. Don't pay an attorney unfamiliar with the laws to educate them.

Bryan Hancock, Bullseye Capital Real Property Opportunity Fund
E-Mail: b.hancock@bullseyecap.com
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I help busy people profit from real estate

Account Closed

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Feb 13 '11, 12:18 AM

Your right Bryan. I liked the initial cushion of being able to walk cheaply from the purchaser without executing my option for whatever reason down the road but with all of the rules its somewhat ridiculous.

I mean I understand completely the ethical reason underlying all of the initial legislation but some of the ideas are they stuck in there are completely moronic.

Yes if you could pm me any good attorneys you might know in Houston I would appreciate it. I have one of those prepaid legal things just for consultation but want a real RE attorney because PPL isn't a substitution imo. Thanks!

What if I lease/ option from the seller and owner finance a buyer is that legal?

Bryan Hancock

Real Estate Investor · Austin, Texas

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Feb 13 '11, 12:20 AM

I have a great attorneys in Dallas and Waco....not Houston. Are you still interested?

If so, send me a PM and I'll get you some contact info.

Account Closed

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Feb 13 '11, 12:28 AM

PM sent thanks

Bryan Hancock

Real Estate Investor · Austin, Texas

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Feb 14 '11, 09:21 AM

Please let us know who you pick. I use Gary Tully FYI.

John Jackson

Real Estate Investor · North Richland Hills, Texas

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Oct 20 '11, 09:57 AM

I was actually referred to this site this past weekend, and here is my first post!! Yeah!
First Michael, congrats on doing something very few investors do...RESEARCH!
You would be amazed at how doing your own research puts you far above most investors.
I've done LO's in TX for 9 years and after 2006 the rumor mill went rampant and part of it was due to attorney's that had land trust courses, and also due to people not reading the actual law.
You can do lease options in TX, but there are specific requirements, such as disclosing mortgage information etc.
One of the big causes for confusion was that the statutes applying to lease options was written into Title 2 Chapter 5 regarding Conveyances, which would be contract for deed. A number of the statutes in this chapter were due to the tornado in Ft. Worth on May 28th, 2000 and introduced by the then State Senator Mike Moncrief.
People can get confused thinking that the same statutes such as giving amortization notices etc. apply to a lease option, but they don't.

Drew Shirley

Real Estate Attorney · Houston, Texas

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Oct 27 '11, 11:41 AM

Selling on a lease option is not worth it in Texas. There is so much red tape and the penalties are so severe if you don't jump through all the hoops correctly. Plus, Texas is the most foreclosure-friendly state in the union. Owner finance, give them the deed and foreclose if they don't pay.

Bryan Hancock

Real Estate Investor · Austin, Texas

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Oct 27 '11, 06:14 PM

I couldn't agree more Drew.

Brian Hoyt

Real Estate Investor · Arlington, Texas

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Oct 27 '11, 06:30 PM

There is a topic that Josh Dorkin started a while back about the top 5 mistakes landlords make and some of the comments get into using L/O. One of BPs regular posters MikeOH brings up some good points about how L/O is more of a theoretical "best of both worlds" kind of strategy to improve rental returns. Chances are, the tenants will do a crappy job maintaining the house (they are renters at the heart of it all) which is one of the "benefits" and they also usually don't exercise the option to buy (so you don't get that inflated sales price you were planning on getting). "Great," you say, "I keep the option money!" But do you really want to let tenants take control of your property's maintenance and then get into an adversarial situation with them (more than typical for rentals) just to keep that non-refundable option? Then you have a shoddily maintained unit that gets destroyed because they are pissed you won't refund the option money which you will now use to fix your trashed unit for the next sucker. I have never done a L/O, but this logic makes a lot of sense to me.