Tx L/O law

Hello All, I was told by a friend in Tx that the lease option bill was dead. She is a person who does L/O. Can anyone confirm she is correct? If not what is the status?

Concerned :-\

I am watching the Bill and have not heard that yet but I certainly hope you are right!!!

It is alive and well!!!

Se - http://www.capitol.state.tx.us/cgi-bin/db2www/tlo/billhist/actions.d2w/report?LEG=79&SESS=R&CHAMBER=S&BILLTYPE=B&BILLSUFFIX=00629

Also, note that they added an ammendment to the original bill so that there was no ambiguity in talking about lease/options. For example, SECTION 2(a)(2) of the original bill read as follows:

“a residential lease of real property that includes an option to purchase the property is considered an executory contract for conveyance of real property”

In its original form, a seperate option from the lease could still be used since no precise distinction was made. Now, with the ammendement, that same section reads as follows:

“an option to purchase real property that includes or is combined or executed concurrently with a residential lease agreement, together with the lease, is considered an executory contract for conveyance of real property.”

What would be the practical result of this law and impact on investors doing L/O?


Glad to meet you.

The way the legislation is written it means you will not be able to do Lease/Options in the state of Texas.

They took into consideration separating the Lease from the Option, so you can’t put the Option portion in your back pocket like it does not exist. Should you have to evict a Tenant/Buyer and they bring up the Option portion albeit not shown in the Lease portion, you would be in violation of the law.

This is assuming this legislation becomes law.

John $Cash$ Locke

It looks to me like the Texas Legislature wants to prevent anyone with little to no credit from purchasing a house. They have already made it impossible for us to use a Contract for Deed. If they pass this legislation, the only medium for those with tarnished credit to buy a house will be owner finance or Sub2. And how many people with poor credit will have the savy to purchase Sub2? I would think that the vast majority of potential buyers with poor credit history have never heard of Sub2, so I hope there are a lot of people that want to sell owner finance. Oops, I’d better be quiet or the Legislature will take that away next.


I called Senator Lucio’s office this morning and they said the Senate version passed yesterday 29 to 1. I don’t know about the house version, but we need to get it killed!

I read the on-line version, and it now specifically also includes Contract for Deed as well as Lease-option.

What about the constitutional right.
“Right to Freedom of Contract”

I’m new to L/Os in Texas and I’m not understanding why you would not be able to do L/Os anymore. I read the bill and maybe I’m not understanding the wording. Can someone help me out here? I want to make sure I’m operating within the law.

I haven’t been around lately, so I have missed this, but what is their reasoning for this bill? I don’t see how this benefits anyone. Thanks, Tony.

Bobo - The people pushing the law are “Low Income Housing” activists. They believe lease-option and contract for deed are simply ways for rich greedy speculators to rip off poor, helpless buyers. You can see the names of some of the groups and individuals here: http://www.capitol.state.tx.us/tlo/79R/witbill/SB00629S.HTM
Their attitude is based on some possibly fraudulent transactions that happened along the Texas border, where unscrupulous people built houses with no water or electricity and sold them on contract for deed to people who did not have the sense to check with the county to see if it would ever be hooked up. These activists think that outlawing ‘non-traditional’ financing will stop such activities. I disagree with their logic. What they will actually do is make it impossible for anyone to buy a home except through a traditional mortgage company. This will mean low-income folks will not be able to buy homes.

Dclark - There are several provisions in the bill that would kill L/O and Contract for Deed. The two most obvious are:

  1. The bill specifically outlaws selling on L/O or CfD if you have an underlying mortgage. You can only carry the paper if you own it free and clear.
  2. The buyer can force a seller to convert the transaction to a Trust Deed with a Mortgage, whether the seller wants to or not. This means the seller could structure the deal to benefit themselves financially and tax-wise, only to have the buyer change it into a bad deal at any time. This removes much of the incentive for making the deal in the first place.


Thanks for the explanation. Now that I understand I hope this bill does not pass or they make some changes. Being that I am one of those person who could not qualify for a conventional loan at this time in life, L/Os are my options. This Bill is going hurt more people than it will help.