RentToOwn-HouseFinder.com - Real Estate Question: Lease to own option and adding a person to the title of the home?

Real Estate Question: Lease to own option and adding a person to the title of the home?

Person A owns the home and offered person B a "Lease to Own" option. The lease to own option states: 1) Person A wants person B to pay %50 of the property taxes during the lease period. Person A will add person B to the title of the home so that person B can claim the mortage payments & property taxes as a credit at the end of the tax year. However, person B is not on the loan. 2) When person B excersices the purchase option at the end of the lease term, the purchase price will be the balance on the mortages + any outstanding taxes owed on the property such that person A can leave the transaction without owing anything. If person A defaults on the mortage/loan and forecloses, what does that mean for person B? Will person B also be liable for the loan?

Public Comments

Get a lawyer that's not the way lease with an option to purchase work
Person B would have problems but not liable for the loan if they are not on it. Suggest a good real estate lawyer to draw up a proper agreement because this scenario isn't it.
Several issues with this agreement be very careful. 1.) Putting you on the title is done through a quit claim transfer of interest. A relatively simple form that gets filed with the county recorder, however the lender that initially gave the note to Person A has an acceleration clause that they can invoke. An acceleration clause is basically they are loaning Person A the money and Person A is the sole owner of the home. They don't know Person B and didn't approve them for the loan, therefore if Person A transfers their ownership of the home or a part thereof, they can make the ENTIRE loan balance come due for Person A because of the acceleration clause. 2.) Owning the home does not give you a right to deduct mortgage payments in any way shape or form. If you are not liable for the loan, you are not paying interest against money you are borrowing (even if you are writing the lender a check). You will not receive a 1098 at the end of the year that gives you an interest write off. As an owner of the home, you will be able to write off a portion of the property taxes and a portion of the depreciation (if you are living in the home only). 3.) If Person A defaults, the lender will foreclose and sell the home. Person B will be out of luck. They will not be personally liable for the loan, but the collateral (the home) will be taken and sold in order to satisfy the loan. Person B would be out of the house. This ties in with exactly why the acceleration clause is there. Otherwise a person could be a dozen houses for people who can't get loans and merely transfer them over to those people that wouldn't normally approve. 4.) Strongly, strongly, strongly recommend an attorney to prepare the lease to own option to cover the terms of the agreement. I've seen too many people get burned on these types of things.
Person A should not put person B on title until a mortgage is secured. Person A can include that person B is responsible for 50% of the taxes in the lease. Person B can't claim any interest deductions because there are no loans in his name (it has nothing to do with who is on title and everything to do with who is on the promissory note). No mater whose name is on title, the person(s) who signed the promissory note will be the only ones affected by a forclosure.
No, person B will not be responsible for the loan. Being on loan and being on title are two separate things. Also, put provisions in place to void the contract and to get damages if person A doesn't keep the property taxes and mortgages current or causes the property to lose value or transfers a portion or all of person A's title in the property. Also, put provisions in place as to what will happen if the place burns down or is damaged by acts of god or by person A. Person A should not put person B on title. What happens if person B decides not to purchase the home?? Regards
The proper way to do this: Person A keeps their existing financing in place and converts their insurance to a "landlord" policy. Person A places their property into a Land Trust and names themself the beneficiary of the trust. Person A then names Person B a co-beneficiary of the trust and the trust leases the property to Person B with a "Triple Net" commercial lease. ONLY in this way is Person B able to take the active tax deduction. When the time comes to refinance into his own name, Person B purchases at Full Market Value (based on appraisal). I can help you with this if you'd like. My contact info is in my profile.