I'm looking for some guidance. I've been leasing a property (small farm) with the intention to purchase. The owner has been difficult to deal with as her situation keeps changing and its been hard to work out the terms of the purchase. Its been so hard that I never signed a lease because we couldn't come to terms on the sale, which she tried to combine the lease with option to purchase. So over a year into it now. There was an electrical fire that burnt the house. The owners insurance wants a signed lease. I'm not sure I'm comfortable signing a back dated lease. Unsure of exposure of liabilities... I want to still purchase said property as I see value there. The asking price was $320k. Insurance assessed damages at 100k, so I was going to make my offer to her at $220k, she keeps insurance money, I purchase as is, and have her finance. Am I missing anything here? Any pitfalls or huge red flags I'm not seeing?
Thanks for your time
Whose insurance is paying for the fire damage? It should be the landlord's...and if so, what difference would a signed lease make?
I wouldn't buy the property as is if thee's insurance money involved...especially if that money is coming from the landlord. I would make the offer contingent on the rehab being finished. Fire damage is nothing to take lightly, and is usually hiding a number of issues (see cost overruns) in rehab. Don't be responsible for it.
If $320k works for your numbers, then make that offer...again, contingent on the rehab being done, and inspected/approved, before closing. This way, if/when there's cost overruns, you won't be responsible for them...and they won't come out of your pocket.
My best guess is that the owners insurance had a clause requiring the house to be occupied for the insurance to be effective. Signing a “back dated “ lease may be regarded as insurance fraud if the lease is used to convince the insurance company that the lease was in effect for a period of time when there was actually no lease. However, the issue of the property being occupied, depending on state law, may not depend on a. written lease. A month to month tenancy is an occupancy not requiring a written lease. Perhaps there’s another way ( utility bills, etc) to prove occupancy.
This also begs the question as to what your goal is here. Are you thinking that you will help the seller out by signing a back dated lease, quid pro quo his selling you the property? If so, you just stepped further into insurance fraud. Be careful you don’t make the owners problems your problem.