Why I'll never offer a lease with option to buy again.

[Jack Forester]

As a homeowner trying to sell his house (before I got into rentals) in 2011, I agreed to a lease purchase option. We agreed that $500 of the rent would go into an account to be used or a down payment, if they bought the house, with a specific purchase date a year out. As the year approached, they moved forward with the purchase and appraisal. The property did not appraise for the agreed purchase price (property prices had continued to decline over that year in my area). They had also found a newly constructed house for the same price, which is what they wanted to purchase, so they broke the contract,even after we agreed to the lower price.

We then sold to house to a new buyer.

The real estate agency that wrote the lease option sued them for the commission,but since the house was sold, the realtor had gotten their commission, so the case was thrown out.

The lease option people then sued me, demanding the $6k set aside for their down payment (even though it clearly stated that it was only available as a down payment, if they purchased our house. We hired an attorney to defend against this frivolous lawsuit and $4k in legal fees later, we won (it was ruled that the contract was clear), and we countered for legal fees. This cost $2k in legal fees, and they countered with a deal for $2k.

Having drug out for almost a year and ready to be done, we accepted.

So, the plaintiff was out $2k for a portion of our legal fees, plus their legal fees. We were out $4k for our legal fees and a year of not being able to get a loan for any property because we were named in a lawsuit. The lawyers made $6k on my side and probably the same on the plaintiff's side. All over the $6k in money towards the purchase.

Could I have refunded the money that they thought they were owed and avoided all this? Yes, but I'm not one to back down when I know I'm right.

Lesson learned? No matter how right you are, anyone can sue anyone, and the lawyers always win.

What is your experience with these?  Do you offer money towards a down payment, or how are your lease options written?