Purchase Contract w/ 2-year lease before closing

13 Replies

You have a mess, you should never have leased the property with a tenant being responsible for maintenance and repairs.

It could be assumed the home warranty would be provided at closing, not at the time of a lease as the tenant would not benefit as they aren't responsible for insured items/perils until they own it.

If there is a default, I suggest you confront the tenant, terminate the agreement based on the next default (as you accepted rents since) and then reimburse her for costs and offer cash for the keys. You might entice her with a first right of refusal instead of a purchase agreement. Terminate the lease, you may need an attorney to evict here if she claims an interest in the property, so reimburse here for costs before you go there. Then sell it to a real buyer. :)

Sound advice needed!

Listed our house, almost three years on mkt, price reduced multiple times. No offers! Finally offered as lease/option-to-buy. Buyer materialized, offered more than asking price. Closing delay due to Buyer waiting on property settlements from her divorce. Closing will be in cash. Buyer is responsible for all maintenance and repairs until closing. We pay property taxes and insurance until closing. The rent covers our mortgage payment and then some. The rental agreement was written as a separate paragraph within the sales contract.
12 months remaining.


We've had some problems. The rent has been late on multiple occasions, though always paid before next rent is due. Buyer always lets us know, and has had some serious unexpected problems to deal with, mostly illness. My husband wrote a note advising her that we were charging a late fee going forward, though we didn't include that in the contract, and Buyer has ignored it.

We have also violated portions of the contract. We were obligated to purchase a one-year Home Warranty, but never got around to it. The Buyer paid for a new water heater and garage door opener when the old ones failed. She's been asking about reimbursement from the insurance company/home warranty that she thinks has been purchased.
We also have not paid the current property taxes, and the penalties are starting to pile up.

My husband is making things worse, IMO. He learned that the landlord-tenant laws do not apply since the rental agreement is part of the sales contract. He therefore calls/texts her repeatedly when the rent is late, even when she has furnished explanation and the date it will be paid. Most recently, the Buyer/Tenant was out of state attending to a parent's illness and hospitalization. My DH knew this, as did I, yet he took it upon himself to call and text the Buyer repeatedly (ten times in one day, I checked), demanding that he be permitted to inspect the property in her absence. This morning he left a 7-day notice on her door, which he typed himself, demanding the rent be brought current or relinquish the house! (The rent is ten days late.)
He seems not to recognize that he should not (IMO) treat our Buyer as a deadbeat tenant. While the late rents are annoying, they are paid, and we absolutely cannot afford to lose this Buyer.

Our realtor has stirred things up as well. She contacts my husband from time to time, stating she has other buyers ready and waiting. (After three years of nothing!) She's told us that the Buyer voided the contract by failing to pay rent on the due date. Is this correct? (Though even if it is, I don't like the idea of the sale falling apart over late rent payments.)


I am concerned that by failing to purchase the Home Warranty and pay the property taxes we have voided the contract ourselves. We can't afford an attorney. Hope someone here can help.

Well, a local RE attorney is by far your best answer. Kentucky law will be different from all other states, but generally you've got a lease purchase, Not a lease with a separate option or purchase agreement. Therefore tenant/landlord laws probably don't apply, and you'd have to go through a foreclosure type process if you wanted to cancel the deal, Not an eviction process.. Late, or even no, rent payments DO NOT void the agreement. By far your Cheapest and Best move would be to spend a couple hundred bucks with a Local RE attorney, who can give you some specific guidance. Put a muzzle on your husband, he's making things worse, not better.

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Contracts are terminated every day, is it filed? Is there a cloud on title that has been filed? Is this agreement simply sitting in the drawer? Is it even a formal lease? I'd begin as I stated, attempt to terminate after removing her claim of any financial interest in the property as to making repairs and replacing a depreciable item. Wave money at her and evict. If they lose the eviction process which they might do on their own, they will be told to go to foreclosure at which point they will need the attorney they say they can't afford.

I'd not call this an installment sale that could be in violation of law, but rather a sale contract with possession prior to closing, which can be terminated.

Can't read the contract, but I assume since a Realtor was involved it's a standard PA with prior possession and rent amounts, that can be terminated. :)

Thank you for responding!

We have a standard Purchase contract with Buyer. The closing date is 24- months out. Handwritten paragraph within contract describing rental terms. The house shows "pending sale" in the MLS.

I don't want to terminate the contract over late rent payments. We need to close the sale. My husband wants to "evict" the Buyer in order to sell to one of our realtor's pie-in-the-sky buyers. I don't see how that is possible (even if we had another buyer, which I doubt) when the landlord/tenant laws don't apply.

Can you elaborate?

Thanks.

Originally posted by @Bill Gulley :
You have a mess, you should never have leased the property with a tenant being responsible for maintenance and repairs.

It could be assumed the home warranty would be provided at closing, not at the time of a lease as the tenant would not benefit as they aren't responsible for insured items/perils until they own it.

If there is a default, I suggest you confront the tenant, terminate the agreement based on the next default (as you accepted rents since) and then reimburse her for costs and offer cash for the keys. You might entice her with a first right of refusal instead of a purchase agreement. Terminate the lease, you may need an attorney to evict here if she claims an interest in the property, so reimburse here for costs before you go there. Then sell it to a real buyer. :)

Hello All,

The Home Warranty was to cover major appliances and systems - A/C, heating, water heater, etc.

The house sat unsold for nearly three years. The rent our Buyer is paying (though sometimes late) covers our mortgage plus some extra. Our Buyer is well-known in the community, had great references, etc. By any method, canceling the contract is going to cause more hardship for us. My nutty husband has lost sight of this - he wants the rent paid on the 1st, period. My fear is that we've already given our Buyer an exit, by not following through on our contract obligations. My other fear is that my husband has caused the Buyer so much grief that she will find a reason to walk away.

We can't cover the mortgage, maintenance, etc ourselves. There are no other buyers, period, and no reason to think there will be.

So rather than embarking on an expensive/protracted effort to get the Buyer out of the house and blow up the sale, I need advice on how to calm things down, save the sale, and persuade my husband that his "deadbeat tenant" approach is all wrong.

There is really no way of saying what applies without seeing the contract and the rental terms. It may not be a lease as much as possession prior to closing under a sale contract. I'd also have issues with a Realtor that did that contract, two years out to a closing? It may not even be considered valid, suggest you speak to the agent's broker. You really need to speak to an attorney, initial consultations are often free to just see where you are.

If you're trying to salvage the deal then see about borrowing some money to get a month in reserve to float the house payment.

There is no solution unless you have a defined goal. :)

Originally posted by @Karen A. :
Bill, you are correct. What we have is a "possession prior to closing under a sales contract."

Don't see how eviction is possible, even if we wanted it.

If there is a payment due date in the contract and the "buyer" missed that, then it sounds like a breach of contract to me...just like failing to close within the defined closing window.

I've looked into lease options in the past and a significant portion (maybe half or more, I can't recall) do not end up with a sale. If this person cannot perform and close the sale today, I don't know what makes you so confident that she will be able to close in ~18 months as the contract states.

As far as the warranty goes..."we didn't get around to it" is a pretty terrible excuse. Is that something that is also in the contract? If so, now you're breaching the contract and you expect her to stick around and perform for the remainder of it?

Ultimately, what she's asking for doesn't make any sense. Home warranties have a deductible, generally $50-$100. Did she replace the garage door opener without notifying you and expect you to reimburse for it? A home warranty isn't going to cover a $25 piece of equipment, so that doesn't even seem relevant.

Also not clear why the "buyer" is responsible for maintenance, but there is also supposed to be a home warranty.

As others mentioned, you definitely ought to talk to an attorney and get your husband to back off...whether a "buyer" or a "tenant" this lady in your house is your customer. You depend on her, not the other way around...so being aggressive and annoying isn't going to magically fix the situation.

PP to closing is only possession, local custom dictates treatment, as month to month rent. Eviction can be the process to remove one who has defaulted on a sale contract.

As I mentioned, without an attorney you can proceed with an eviction. In court you may win and she could be removed. That can happen, what will make any court lean toward foreclosure is if the tenant has gained an ownership interest in the property, that can be done by making repairs at their expense. That is why I said to reimburse her for those costs so that she may not make that claim. If the court tells you to foreclose instead of winning the eviction then you will need an attorney.

If she sees you started eviction and you offer her cash for the keys, to help her move, she may just take it and leave. Many don't show up in court, if she doesn't your chance of winning the eviction is greatly improved.

If you choose not to go that route, get in a position to cover the mortgage to save your credit since it appears she can't pay on time. Continue with you contract and go to closing.

If she gets a lump sum of cash what happens if she then decides not to close?

So far your Realtor hasn't been giving good advice or representing you well at all, a sale contract with PPTC for 2 years wouldn't even be dreamed of by a Realtor/broker here or anywhere I've been buying. KY law is very similar to MO. Keep any friendship out of it, this is a mess your Realtor allowed you to get into. Talk to that broker! Another option is to require that broker to collect the rents, in fact they should advance the rents and collect them, IMO as they bear responsibility as well.

I also suggest you see an attorney. :)

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An early reply said buyer can make late payments with NO effect on the contract.

Buyer has made every payment so far, though some have been late.

Kentucky law states the uniform landlord-tenant rules do not apply to our situation. The statute seems clear, so I am wondering why some replies advise to evict.

We could not afford maintenance/repairs on the house in the pre-closing period. Buyer is responsible for maintenance and repairs. Buyer is also free to improve the property as she desires. Buyer does not have to ask permission or inform us of any repairs/maintenance. However, Buyer assumed that responsibility based on our agreement to purchase Home Warranty, which would offset her costs. Since we did not purchase HW, none of her costs will be offset.