L/O and executory contract issues?!!

Hi everybody,
I talked to an Austin attorney recently and he discouraged me to sell RE on L/O in the future. According to him a Lease Option arrangement with the lease period longer that 6 month could be construed as an executory contract in which case all the reporting requirements and issues associated with the use of Contract for Deed/Installment Land Contract in TX after Sept. 2001 would be in place.
Any opinions?


Apparrently your attorney doent know much about RE law.

A LO is different from a CFD. LO doe not give equitable interst to buyer. SIgn 2 different contracts, 1 for lease & other for option.


I think he is speaking that if you use ONE contract it could be a problem. Thats why as the poster before said use seperate contracts.

As for CFD in Texas, I spent the day at a very knowledgable attorney/investor here in Houston this week, unforunately because my parents needed his services. They sold a home on CFD, not knowing about the new laws that were implemented in 2001. The attorneys advice was to NEVER use a cfd here anymore… and to switch any you do have already into a deed of trust. The new laws have made it ridiculously easy for the home buyer to be able to sue for everything they have ever paid into the home, and up to triple including other damages (Pain and suffering… ect)

Hope this helps,
Heather Zaal

I appreciate everybody’s for the responses!
Actually, I asked the attorney just to review my lease and option agreements that are 2 separate and I think properly structured documents - non refundable option consideration instead of downpayment, fixed option price, option term less than 3 years, I pay the taxes and insurance etc. and he came up with that.
I think that the key thing here is that the option is considered a personal contract until exercised (a detail possibly missed by him) at which time it becomes an executory contract. The new statute does not apply if the deed from the seller to the buyer is delivered within 6 months of the date of the final execution of the executory contract therefore L/O arrangement should be off the hook. Please note that I am not an attorney or a son of an attorney… and everything above is just MHO.
Heather, I am very sorry about your family and your are absolutely right about the use of land contract to sell RE in TX.
I noticed that you are in Houston and was wondering if you could refer me to a RE knowledgeable and uptodate attorney.
Thanks again!

I definately can. Give me a ring at 713=201-2895 or email at webuyhoustonhomes.com



One small note to your previous post. You can not actually get pain and suffering damages in contract disputes. I believe that is for personal injury only. You can seek treble damages for deceptive trade practice and the judge or jury could try to punish the defendant with punitive damages but I believe that is all and should be enough. I learned this from Judge Judy and other personal experience and not in law school.

Good luck and thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737
512-301-9171 home
512-587-6177 mobile

I have gone over the executory contract issue with my attorney. An executory contract is one in which it is for the sale of real property at a future time. The 6 months come in because the statute, not just for CFD, specifies 6 months. Because the lease is separate from the option it does not become an executory contract. You do want to be careful and not make a TREC contract specifying what the terms are. Include all of that information with the option.

I deal mainly with land trusts and the land trusts are for personal property(beneficial interest). Title passes and so there is no executory contract. On the buyer end they may have an option or they may have a first right to buy such as the EHT.

The caviat to any of this is that a judge can rule most anything in trying to be equitable and you would end up having to appeal

Also, Understand as someone wiser than me… once explained…

On this site even, I believe… A CFD is simply an Option to buy on installment payments…

We switched a over a year ago to selling everyhting on Note and DOT…

Should have listened to Eric C… he saw it coming down the pike… years before that…

David Alexander