Am I liable?

[investinAK]

Hello everybody got an ugent question for y'all!
I have a property on Lease option and have recently terminated the contract. Here is the explanation of what happened-the SHORT version.

Went to show the house to prospective sub-tenants a few days ago, show up and try to get in, and NONE of my keys work. The locks have OBVIOUSLY been changed. I went home and called the landlord and they said that they wanted an additional $1500 UPFRONT before they would allow me access to show people. I sent them a certified letter saying that due to their violation of our contract I wished to terminate the contract.

Am I liable for the contract even thought THEY violated it?

Here are a few clauses that were in the contract that they broke:

Paragraph 9: Entry and Inspection: Lessee shall permit Lessor or Lessor's agents to enter the premises at reasonable times and upon reasonable notice for the purpose of inspecting the premises or for making necessary repairs.

(The claim to have called several times, but have not left a message. I got a certified letter today saying that effective April 1st the locks would be changed until I came up with an additional $1500. Today is April 5th!)

-Lessor to provide Lessee with key upon acceptance of contract and allow access to show prospective tenants.
(I no longer have access)

-First month's rent along with down payment on promissory note (deposit of $1500) will be due in 30 days, or when a sub-tenant is located and put into property, whichever is sooner.
(Promissory note was to be option consideration amount of $3000. $1500 in 30 days along with first payment, the remaining $1500 over 12 months at 15% interest)

There is also a paragraph in the contract stating that if possession is not delivered to me within 7 days from commencement (April 1) that I may terminate contract.

Anyway, our theory is that they found out HOW much money we would be making (as they referred the first possible T/Bs to us) and decided they needed some MORE money.

So again, am I liable for the remainder of this contract?

I had a T/B ready to go in, and by terminating the contract lost out on approx. $25,000 profit, but I would rather lose it now, than have troubles with them in the future, which I could already foresee.

Also, they claim to have been told by their "advisor" to get another $1500 UPFRONT! I have been told by the husband that their "advisor" is a Robert Allen telephone coach. Figures.

Sorry for the huge post.


Thanks,
Ryan

[Dan Auito]

Ryan, if you had the additional $1500 would the deal still work? I wouldn't worry about liability as it seems they are going to make the big chunk now as a result. They didn't give up possession as agreed so that should be enough to justify your position. Bummer on losing this deal.

[investinAK]

I thought long and hard about it (before I made the decision to terminate the contract), and came to this conclusion. If they had the gall to go in there and change the locks WITHOUT notice BEFORE I had T/Bs in there, what is stopping them from doing it after I have T/Bs in. Or any other drastic actions? I can only foresee them being problems in the future.

When I called the other day, the guy sat there and told me, "just read the letter we sent you, it explains everything." I just got the letter today and it had about three sentences. "In accordance with the advice of our advisor, we are requesting an additional $1500 in cash to continue with this contract. If $1500 is not received within 3 days of receipt of this letter, the contract will be terminated. Effective April 1st, 2005 the locks on the home in question will be changed. Sincerely, Satan and Satan's husband." Ok so I mad that last part up...

Anyways, I cant say I didnt come out of this with nothing, I DID lose some money advertising it, and showing it, and little expenditures here and there, but overall it has proved to be a GREAT learning experience. Surely not one I would want to go through again, but still...

As far as the T/Bs that were ready to move in, they are still looking for a home. The best part is...they want ME to find it for them, and sell it to them. They were very happy that I was honest and upfront with them about everything, so they have told me their requirements for a home, and I am out searching.

So all in all, I COULD have gone on with this deal, but quite honestly am glad to be rid of it.

I think I may have learned why sandwich L/Os are NOT a preferred way of acquiring properties.

Sorry for the long post...again. :)

[Dan Auito]

No need to be sorry Ryan, your providing great education for those who read along here. I think I would have changed the locks on them once I had those keys! So be it, onward and upward a little wiser for it. My hats off to you for getting this close so early on, and you still have tenant buyers hanging with you so all in all you are indeed getting a priceless education and making contacts along the way. Good job overall! :thumbsup:

[investinAK]

Thanks Dan! :) I have built a nice list of tenant/buyers as well as a few local part-time investors who are looking for properties around here to buy and hold. That in itself is worth the cost of gas ($2.25/gallon!!!) to drive out there, and the newspaper ads. :)

The education is definitely priceless, some of the things I have learned over the course of this deal are certainly not included in your run of the mill real estate course.


Thanks again!

Ryan