Lease Option renewal

[Jordin Boyd]

So I have a tenant buyer in a house right now. They are 1 year into their 2 year lease agreement and their option to purchase agreement states they can purchase any time during those 2 years. They just informed me that they are not going to be able to buy in the 2 year time period and want to know if we can renew their contract for at least one more year. I'm fine with letting them do this because its cash flowing well for me and I don't have to handle any maintenance on the property so the longer they stay the better as far as I'm concerned. My question is, to renew their lease agreement and option to purchase agreement, do I require another non refundable deposit or does that just roll over? It seems like charging them another deposit in order to stay would be a little crooked but if it went directly toward the purchase price then maybe its not so crooked. I don't know how this is typically done.

Also, if the tenant wants to pay extra money once in a while and have it go towards the purchase price (and I'm ok with that) should I provide a different receipt for that payment? How do I document that they paid extra and reduced the agreed upon purchase price?

Any thoughts or related experiences? Thanks in advance!

[Priscilla Z.]

@Jordin Boyd We do it the way @Brent Coombs described.  None of their monthly rent goes towards the purchase price.  The reason being that once you give any amount towards the purchase price it can be seen as owner financing, and if you need to evict them one day the judge may see it as them having equitable interest in the property and therefore you may need to foreclose instead of evict.  We have evicted two lease option tenants with no problems because we have two separate documents, one is the lease and the other is the option.  It clearly states that if the lease is violated the option is null and void.  

Another reason we don't give monthly credits towards purchase price is because of the changes to Dodd Frank back in January 2014.  My partner is more well versed in that area and apparently it's open to interpretation so because its pretty new we decided to avoid it all together.

With all that said, I think now is your time to renegotiate terms with your tenant buyer.  You have the final decision in renewing with the for another year or not, so go ahead and set the terms you want for the renewal.  I don't see anything wrong with that.  Just make sure every detail is clearly written out, and if I were you I would notarize the new documents.