Lease/options with no incoming payments

I have a few questions and hopefully some of the experience from all of you will be extended. I have been reading about the deals and wording in contracts and types used from your incoming questions but unfortunately what recourse is taken if your tenant doesn’t make the payment? Normally would the option be cancelled and then pursue small claims? What about the non-refundable downpayment?

The topic I am interested in has to do with the tenant in a lease/option or with a land contract where the monthly payment is not made back to the investor or through a property management company. A lease would be simple but the option now becomes a block in the legal sense without the cost being raised. Also if the option is cancelled, what happens to the maintenance that was part of their responsibility?

What recourse has a been successful in in getting the tenant to pay or move? Small claims would not be the answer especially if a downpayment was paid. It can be considered in a purchase agreement regardless if the option is ever pursued. How about with a land contract?

What is the best solution to get the tenant to pay or move out without going to a higher court? Please direct me to a better location if this is not the best source for this information and what experience some of you have had. I appreciate any thoughts in this area.

Hi and welcome,

I have used lease options as a tenant many times and was successful in claiming an equitable interest in a Sacramento home many years ago. You need to review this thread and go back in the archives. There are many discussions about lease options, pro and con. There are virtually no cons as a tenant.

As a seller, eviction is difficult because there are many things that can allow a tenant to claim “equitable interest” and force an eviction. Here are five listed by an AZ state senator who wrote the Landlord-Tenant laws in the state. Be very careful to properly structure your lease option if you use one. Different states have different laws so these are just guidelines and one or more may not be applicable in your own state:

  1. Collection of more than 1.5 times the monthly rent as Option Deposit is illegal in Arizona by statute, and seen by the court as a “possible down payment”. Check your state’s laws.

  2. Collection of an Option Deposit or Rent Credit to be credited to a Purchase, or to discount the Purchase as in a Down Payment.

  3. Predetermining a Purchase Price, as in delaying or disguising a sale. Think about it. If you agree upon a sale price at the beginning and you agree how that price will be paid, you have a sales contract, no matter how you disguise it.

  4. The Lessee also holding an option on the same property they are leasing regardless if it is one document or two separate documents. (This means no sandwich leases and is becoming more prevalent in this anti-small investor market).

  5. The Lessee being responsible for maintaining the property.

If the lease is not recognized by the court as a lease, it doesn’t get the benefits that go along with a legally recognized lease. If the judge feels a sale has taken place instead of a lease, the rules governing foreclosures will apply. Possession of the property will be decided by a judge in position to decide matters of title and the process can be extremely expensive. Costs can run $10,000+, not including having to pay the back mortgage payments during the life of the suit.

You asked what is the best solution to get the tenant to move out and my answer to you is don’t do anything that will enable him to claim an “equitable interest” and you’ll be able to evict. I use an equity holding trust to achieve the same goals as a lease option without the obstacles.

Good luck to you.

Da Wiz

A simple eviction will work 90% of the time because 9 out of 10 times the tenant won’t show up in court. Out of the remaining 10%, half don’t have a clue about equitable interest. Screening your tenant/buyers will solve most of your problems. common sense tells us that if a T/B can’t pay you, then he can’t pay a lawyer either. Having good paperwork will take care of this problem. Go to your local REI club meeting and ask about this, and you will get answers from local perople who have dealt with it

Equitable interest is not a major issue except in rare cases. And the above post is about Arizona law, so unless you live there, disregard it, as it doesn’t apply to your state.

Kindly give references to where you found the figures that 9 of 10 people don’t show up in court, and that the remainder don’t even know about equitable interest. Attorneys DO know about equitable interest, and so do the Courts – and the issue is being raised more and more. You just learned about it recently, haven’t even done a deal, and now you’re an expert. As Don King would say: “Only in America!”

I told the poster that this interpretation of the law applied in AZ, but lease options are already banned in Texas, and under scrutiny in MD and several other states. I instructed him to be very careful and to know the definition of a disguised sale so he doesn’t get nailed for doing one. I didn’t even bother to warn him about how the IRS is taking a strong look at lease options and disguised sales. It is really important to be prepared and knowledgeable about your investing methods. Your ostrich approach doesn’t work these days.

Da Wiz

I know something that will not work unless people are stupid…and that is your fear tactics regarding equitable interest, the IRs and the DOSC. Posting Arizona items has no bearing on investors unless they state that they live in Arizona. Your credibility is a zero because of your thread hijacking and board hustling. For that reason alone I would never pay any mind to anything you say. Keep on cutting and pasting your same old dribble over and over. It’s good for laughs if nothing else.


Inquiring minds want to know. Have you ever done a deal?

Da Wiz

You can keep changing the subject Wiz, but as long as you use fear tactics to try to scare investors, I will make sure they also know what you are up to. You will not get away with board hustling or anything related to trying to drum up business for the trust method that you promote. All investors need to know what your game is…and it is trying to use fear tactics about certain issues to try to convince people to use the trust. You try to disguise it sometimes by not mentioning it…then you wait for some unsuspecting new investor to ask how to avoid it, then comes the song and dance about the trust.

The DOSC, equitable interest and the IRS issues you are using as scare tactics rarely happen. It is certainly notr a reason to overspend on protection. Good solid paperwork will solve that issue without wasting money.

Like I said, you keep up your board hustling and thread hijacking and fear tactics…and others who know your game will keep making sure you can’t pull the wool over someones eyes.

With regards to proving anything, you have not ever proven anything except that you can cut and paste a couple of things and then claim they happen regularly.

Answer the question, Bobo the King. Have you ever done a deal? Yes or no.

Da Wiz

As soon as you stop board hustling, thread hijacking, and the lame fear tactics, you may then ask questions. Until then, you are not in any position to ask me or anyone else any questions. Many are tiring of your act. and the constant deflecting away from this doesn’t change anything. You can ask anyone all the questions you want, but no matter the answers, you are still a classic board hustler, and it has been proven over time on multiple forums.


We’ll take that as a resounding NO, you’ve never done a deal and your posts reflect it! You cry to the moderators about me all you want. Board hustling involves sales. You are apparently a wannabee who has never done a deal and who recklessly advises investors they should “ignore the DOSC”, “ignore equitable interest” “ignore banks” “ignore the IRS” and stick your head in the sand. When you do that, Bobo, your butt is THEIRS. And where did he learn that? From a course he took last July.

Here is what an experienced moderator on this forum had to say when he answered in another thread on lease options:


Da Wiz

Let’s get back to the original question.

Went to court last Tuesday on a L/O eviction.

Had filed all the correct notices and eviction papers. Tenant decided to try to stall and fight the eviction by filing an answer with the courts.

Tenant tried to pull that ownership/equitable interest defense. Judge told him that is not what we were here for today and didn’t want to hear about it; that this case was about an eviction for non-payment of rent. When the tenant stated he didn’t have the money, the Judge ruled in our favor and told the tenant to either have the money in our hands by noon Friday or be prepared to immediately get out.

No show/No call for payment on Friday…Constable has papers to lock out Monday. Case Closed.

John (LV)

No, you can not take my answer as a yes or a no unless the answer comes directly from me. Answering your own question with your own answers is lame. Like I said, as soon as you quit doing the things I listed above, then you may be in a position to ask me questions. Until then, you don’t have that right.

The answer stated by Da Wiz is meaningless, since I am the only one who knows anything about myself.

Bobo (Tony)

I just read your first post when you joined the club: “I owned some rental property back in the 80’s…one turned into 50K…the other 3 were useless. Because of legal issues and poor estate planning and very poor use of asset protection, they are history. I bought 3 Legrand courses back in '97…had 2 deals lined up before health issues came up and I lost both deals. I have 7 years worth of excuses for not doing anything between then and now.”

Had I been aware of your situation I would have gone much easier on you despite your repeated board hustling mantra. My question to you is why do you fight so hard against the land trust or the equity holding trust that I use when that is exactly what you needed for proper estate planning, asset management and/or asset protection?

I’ll make you an offer. I’ll mentor you or joint venture with you or do whatever it is that is necessary to provide what you need to get your investment career rolling. One condition: None of this “ignore the DOSC baloney”.

Da Wiz

Thank you for responding to me and the kind welcome. I am not an investor as you may have guessed by my questions. I hope that doesn’t ban me. I have often explored these sites to understand better what is going on with this type of investing. I may consider flipping or even the renting out but when it comes to an option I would want a separate deal. The rent to own with lease/option does not have as much appeal to me unless you have the right type of candidate who also has a purpose for using this method for short term.

Processing non-payment has been part of my duties and I have done several small claims for non-payment or should I classify it as breach of contract. In a majority of my cases, the renter does not show up but it is by their choice and the times they have the issue of the option never was brought up. We either get paid or we file the writ. Last week, I did not breeze by and as a AP, AR, Collections person, my valid plea of non-payment was not accepted when the renter brought up a maintenance request that was denied. The judge asked if there was a potential purchase here and the rest led to a dismissal. All my cases that afternoon were dismissed referring me to a higher court which would mean attorney. I understand an option is an agreement however unless it is actively used and the bigger issue of whether or not the payments have been made would take the front place.

Has anyone had this issue before and would a installment land sales contract be any different?

I will look through the archives more in this research however depending on your judge, this can happen as I have now discovered after maybe 50 cases without a dismissal whether they showed up or not.

Thanks again.

Thanks for the advice on the past entries. I have reviewed many responses to the lease/option issue also the land contracts.

Thanks again for any responses.

I do not fight against using a trust as much as the thread hijacking and fear tactics you use over and over. If you could just answer questions, and not turn every thread into a trust debate, I doubt people would have any problems. and since it’s many people on multiple forums, I’d say the point is legit.

Also, the deals I had back in the 80’s…a trust or a corp may have helped, but my own ignorance and lifestyle back then would have found another way to mess it up. The story is too long to tell, but I was barely 20 years old then.

I do not want your mentorship, as things are going very well, plus I am a student of John Cash Locke, who is the best sub 2 educator around…not to mention help from a local investor who I went to HS with, who is a member of my local REI club.

I admire your loyalty, not your judgment. Good luck to you.

Da Wiz

OK you two…are we gonna have to take your shovels, take you out of the sandbox, and put you in “time out”…?



Is that like invoking the DOSC? Peace.

Da Wiz

<<Is that like invoking the DOSC?>>

No, this is worse…this could actually happen! :bash: