Lease Options in Texas

General Real Estate Investing
1

I’m an aspiring rei in Austin, TX and I’m really concerned, and discouraged, about what the Texas legislature is doing to eliminate lease options for investors in TX. The TX legis. has already screwed up Contract for Deeds. If I buy a property sub2, how will I sell it as an owner finance?

Hoagy
Austin,TX

2

Did L/Os just become illegal if you have a mort on the property in Texas? I saw that bill passed and is on Governor’s desk to sign now.

went here but did not read the bill yet.
savetexasrealestate.org

I was all excited to do 1-2 or maybe up to 3 year LOs.

3

oh hmm

(e) This subchapter does not apply to an executory contract
described by Subsection (a)(2) if the term of the contract is three
years or less and the purchaser and seller have not been parties to
an executory contract to purchase the property covered by the
executory contract for longer than three years.

Looks like I am ok then for 1-3 year LOs. or ?

4

This is from my real estate club:

The Word from the Lobbyists
Joe Bishop & his partner explained that:

  1. Our opponents on this issue are not just ACORN, the consumer advoacy group that wrote & introduced this bill, but two others. The first is John Hennenberger, who works on behalf of the poor and is around the Senate & House every year, and the other is someone named Ray from the Texas Association of Community Development, and the two of them basically used ACORN as a pawn to get this bill on the table.

  2. The removal of the provision allowing options under 3 yrs was made at the last minute by Senators Lucio & Dutton, and no one knew this was coming.

  3. One of the reasons we weren’t very successful in having our amendments included in the bill is that investors have the image at the Capitol of being “slumlords, manipulators of funds, using deceptive trade practices and preying on the poor.”

The lobbyists recommended that we form a state-level organization to represent our interests, form a PAC, raise money to fund both of those, and spend the next two years reforming our image.

5
The lobbyists recommended that we form a state-level organization to represent our interests, form a PAC, raise money to fund both of those, and spend the next two years reforming our image.
Well that'll keep the lobbyists in business no surprise that's what they recommend.

…or you could just use one of the other myriad ways to sell on terms :slight_smile:

6

DougON,

Could you give some examples of selling on terms? $Cash$ recommends in Texas to sell with an AITD -

An All Inclusive Trust Deed (AITD) or “wraparound” mortgage is a way to pay multiple mortgages by “wrapping” them all into a single payment. It is a fancy Trust Deed (TD)/Deed of Trust (DOT) where you can cover additional financing added to the original TD/DOT.
A Contract of Sale is a form of an AITD. The difference is how the deed transferring ownership is treated. On an Installment Contract (Contract of Sale/ Contract for Deed/Land Contracts etc), the deed which transfers the ownership of the property is held by the seller until the terms of the contract are completed, while on a standard AITD/wrap, the deed transferring ownership is recorded immediately.

Can anyone else elaborate on the AITD’s? What are the pros and cons of an AITD?

7

Hoagy, as you mentioned you’ve got wraparounds and contracts for deed. Plus delayed closing contracts (similar but slightly different than CFD), contract for option, land trust.

The pros and cons of each depends on the laws in your particular state/province.

8

Hey,
So can we do L/O’s or not as long as they are less than 3 years?
Richard

9

‘2. The removal of the provision allowing options under 3 yrs was made at the last minute by Senators Lucio & Dutton, and no one knew this was coming.’

REI clubs are lobbying Gov Perry, who is pro-businees, to veto the bill. Otherwise, I think you can do L/O’s until the end of this year, after that, it woundn’t be feasable with the new laws.

10

Hey,
Thanks for the update. I had not heard of the last minute change knocking L/O. I know there has been debate about individual REO’s directly contacting legislators. How about the gov? If we did it under our business name would it make a difference? Thanks again, Richard

11

Please contact Gov. Perry and help us get this bill vetoed!

TEXAS REAL ESTATE INVESTORS ASSOCIATION

UPDATE HB 1823

To All Interested Parties

House Bill 1823 has passed the combined Senate and House Committee.

The bill in its current form has been sent to the Governor’s Office for final signing. Should the Governor not veto this bill by June 19th, whether he signs it or not, it will become law.

We believe the bill is not good legislation for many reasons including:

  1. Classifying a lease option of any term as an Executory Contract;
  2. Requiring 30 days notice to cure in the event of a late payment;
  3. Dis-allowing the forfeiture of any option consideration for a late payment;
  4. Retroactively allowing a purchaser to cancel and rescind a lease option contract if it is discovered that the property was platted or subdivided incorrectly.
  5. Although allowing a purchase money loan on the property, the bill:
    1. Prevents refinancing of a loan under a lease option;
    2. Requires underlying lender permission, their acceptance and acknowledgement of egregious privacy issues surrounding the loan;
    3. Making a violation a deceptive trade practice;
    4. Places egregious requirements on lease options while not affecting transaction of greater significance (ie. Wrap around mortgages)
  6. The potential unconstitutionality of the bill in creating an alienation on property, the retroactivity of part of the bill against the U.S. Constitution, and restraint on trade;

As such, the lobbyist for The Texas Real Estate Investors Association has requested that all interest parties write and fax the governor requesting he veto this bill. The address and fax number address is as follows:

Address:

The Honorable Rick Perry

Governor of Texas

1100 San Jacinto

Austin, TX 78701

Office of the Governor Fax: (512) 463-1849

PLEASE ENSURE ANY LETTERS OR EMAILS ARE TACTFUL, BUT TO THE POINT.

Please see reverse side

IT IS IMPERATIVE THAT EACH LETTER IS INDEPENDENT AND NOT APPEAR TO BE A FORM LETTER OR COPY OF ISSUES.

Other issues which The Texas Real Estate Investors Association feel are of import are:

  1. Assisting disadvantaged and often first time homebuyers in acquiring properties when no other conventional method may exist. We estimate the number of homes sold to be approximately 40,000;

  2. The impact that real estate investors have on local economies by:

    1. improving neighborhoods by renovating distressed properties (approximately 80,000 per year);
    2. increasing tax basis for local communities by approximately $1Billion yr;
    3. adding to the employment base both by employees they hire, but also the construction personnel they employee;
    4. secondary employment of appraisers, inspectors, mortgage bankers, bankers, local hardware/construction purchases, etc;
    5. community redevelopment;

  3. The overall value real estate investors add to the consumer;

  4. Adding value to the economy through approximately $10 Billion dollars in acquisitions of properties and repair of same;

  5. Removing foreclosures from lenders books;

  6. Any other issues to which you may be able to develop.

Your assistance in this matter is greatly appreciated.

12

HEY GUYS,
JUST SENT GOV. PERRY A FAX AS OUTLINED ABOVE. HAVE YOU DONE IT YET? TIME IS RUNNING OUT. THIS IS $$$ !!! PLEASE ADD YOUR VOICE TO THE FRAY AND YOUR FAX TO HIS IN-BOX. THANKS.
PEACE,
RICHARD

13

This is BS. If they pass it, honest real estate investors will be hurt, and the “true” slumlords… the guys who keep people in decaying rented apartments… will be boosted, because less people will be helped finding a home of their own (through L/O’s) and will be forced to continue renting.

Z

14

Hey,
Hope you sent him a fax if you are frm tx. Tomorrow is D-day for L/O in Texas.
Peace,
Richard

15

I’m not even from Texas and I sent him one…

Z

16

Me too. Remember that many states like to adopt other state’s ideas.

Take care,

… Christopher

17

Hey,
My personal thanks to all who sent faxes to Gov. Perry. Maybe someone out there (Hoagy?) has the connections to find out what eventually happened. My cynicism with government will no doubt probably be confirmed in that those with the deepest pockets get to call the tune of the piper called “our elected” official. Nonetheless:
Peace,
Richard

18

He signed it into law. >:(

Z

19

Hey, Z,
Ouch!
Peace,
Richard