lease to own, Raleigh NC. 3 week eviction vs 18 month eviction

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lease to own, Raleigh NC. 3 week eviction vs 18 month eviction

Matt Berklacy
Rental Property Investor | Realtor · Jacksonville FL | Savannah Ga |Raleigh NC · Member since 2017 · 467 posts · 161 votes

Anyone do alot of lease to own experience in NC ?  and has understanding and tips of the worst case scenario (eviction needed) differential for a straight lease eviction versus lease-to-own eviction?

(its been brought to my attention that straight eviction can be done in weeks, versus a lease-to-own could be year+, 18 months, completely different costs time, courts process...(People, professionals are telling me their third party stories of lease to own and how tenant doesn't pay and its massive undertaking to do eviction, and no body offers lease to own. Property managers, agents advise and say its rarely done in NC and too risky)

(I hear in education circles that lease to own is the way to go... I want to act on it. Lease to own makes sense:   higher down payment deposit non refundable, tenant is responsible for fixings, tenant takes better care of place, tenant only exercises half the time, you can raise monthly payments a little higher...Id like to use this strategy going forward....

but I never heard that eviction is completely different, between weeks and years.

Would you share a contractual way to avoid this lengthy and costly  eviction, and further experience.

(I currently have properties professionally managed in briercreek, cary, and raleigh 27611.  Im absentee in another state, hands off.

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  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    7y

    After the Great Recession (2010) the NC legislature created , NCGS Chapter 47G. Failure to comply with the process described was, by statute, considered an Unfair trade Practice (UTP). In October 2015, adjusted several residential property laws including 47G and 47H, and the UTP remedy changed to a more concise (paraphrasing here) 'evictions stay in district court and the aggrieved tenant buyer can initiate "asserting that claim in a separate action"'.

    The way to avoid problems is to follow the law. Minimum contents of option contracts is well defined in 47G-2, but it is amazing that some attorney drafted Lease/Option to Purchase contracts fail in this very basic requirement. 47G-2(d), Recordation, is IMO (without any statistics, just a conclusion from talking to attorneys) is the most common non-compliance. Before 10/2015 an unrecorded L/O subject to UTP, where a tenant buyer initiated a claim or counterclaim (from an eviction) would not be handled in small claims court. So the owner/seller would need to retain an attorney (LLCs can't represent in superior court) and that's where things bog down, time-wise. Meanwhile the tenant stays in your place, presumably not paying, and owners without adequate reserves and "emergency funds" could be in crisis.

    A Sidebar: the above describes lease with option contracts. Lease to own is similar but different, There are no NCREC forms for either. There used to be, but because of the large number of legal issues resulting from these contracts the REC got out of that part of creative real estate. See page 8 of this developed after the Great recession in the 2010-2012 time frame for more details. 

    My company offered and has done lease options (but not since the law change in 2010), but only in an effort to effect portfolio changes. In other words, we wanted the tenant to exercise the option. When they didn't exercise and close, we lost, they lost, ... everyone lost. Our L/O offering was unusual in that most owners/landlords using L/O before 2010 saw it like you do as a revenue enhancement tool rather than a 'normal' alternative financing method. Not that there is anything wrong with that, but the small number of unscrupulous operators led to the 2010 legislation. I posted here on BP that I was in favor of the 2010 law and still stand by those posts. Other than the recording requirement, our pre-2010 L/O contracts followed all the legislative requirements anyway, and we also offered a 30 day (paraphrasing) 'rent for 30 days and if you want to do a L/O, just let us know in the 30 day period after you sign the lease'... no premium lease pricing and the 'fee' was generally equal to one month's rent. 

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  • Adam SchneiderPro Member
    Lender · Raleigh, NC · Member since 2012 · 957 posts · 639 votes
    7y

    @Matt Berklacy, @Chris Martin  -- this is a good topic for everyone to brush up on.....I agree completely with Chris Martin's comments above. I'll add two of the provisions about the Option contract that need to be noted--there's a 3 day right of recession period on the Option contract. Then, under the category of small technicality but important...there's a part of the Option contract that needs to be in bold, and in at least 14 point font. I know of one situation where the Option contract not having the proper font size (and not being in bold) resulted in a ruling in favor of the tenant/buyer. 

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    @Matt Berklacy it may sound like easy money, but it's not. In my experience, over 80% of lease-options fail and the seller loses money. They CAN be worth it if you know what you are doing. They must be structured properly and you need to be on the ball when it comes to legal recourse for failure to perform.

    Find an attorney that is experienced in lease-option.

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