My First Lease Option- Loss Clause?? Help!

[Ricky R.]

Hi Guys,

So im wrapping up my first lease option that I bought using "subject to" method from an out of state distressed seller. Took over $48k mortgage with $1k to seller at closing and $1k due to seller when house is sold for every year that the mortgage stays in their name..up to 5 yr max. Sold the house via lease option with $10k option fee, $800per month rental rate for a 2yr term with the agreement that he finish the leftover repairs needed to home (which has a $125k ARV). And finally an $85k sale price if they exercise the option. So ive closed on the sub 2 purchase and im to signing day of the lease option. My question is this..

- the buyer asked what happens to his fee and the money he's put into home if the house gets burned down or destroyed..whether partially or fully. The lease states this " DESTRUCTION OR CONDEMNATION OF PREMISES. If the Premises are damaged or
destroyed by fire or other casualty to the extent that enjoyment of the dwelling unit is substantially
impaired, Landlord, in its sole discretion may elect to repair the Premises or terminate the Lease
upon thirty (30) days' written notice to Tenant. If the Premises are condemned or cannot be repaired,
this Lease will terminate upon twenty (20) days' written notice by either party".

So I obviously know my insurance will pay but can anyone provide anymore insight as to how I should interpret, handle, explain, insert additional clause in lease, etc to be fair in the unfortunate instance that this may occur? Should I state that any money  (option fee, repair costs) will be refunded if i terminate lease, per contract? What else? Any feedback would be great as we are signing tomorrow. Thanks BP!!

RICK