Lease Options Illegal in Texas?!!

I just heard that lease / options are illegal in Texas.

Has anyone else heard of that?

Apparenelty lease/purchases are not: (IE:

Your help is appreciated.


For those in Texas, the only way you can use a lease option is if you own the property free and clear. However, this is how to do a lease option legally in your state. You can still get all the benefits of a lease option without worrying about the DOSC or a disguised sale or equitable interest, by using a land trust to get the same results:

The property is placed into a Trust with the understanding that, at the end of the Agreement, the property will be sold to the Resident Co-Beneficiary at Fair Market Value, minus any and all sums owed to the Resident Co-Beneficiary. Verbiage is such that there is actually no “Option” per se; and that there is no “bargain buy-out” provision other than “…at Fair Market Value, less amounts due the respective beneficiaries.”

You get the same thing as a lease option without the pitfalls, and with asset protection and privacy.

Hope this helps.

Da Wiz

Look up Texas Senate Bill 629.

Became effective I think Feb of 2006.

You can still do a lease/option just once on a property for 179 days in Texas. I am seeing many investors do a six month lease option and then converting them to an owner finance. Few investors have the relationship with lenders to do a straight-up seller financing due to the “due on sale” clause, but they are out there. Another option that I am seeing is doing a wrap deed of trust. There are ways to do it, but the length of paperwork increases dramatically.

Lee Warren