When a Lease Option Goes Really Bad

This a true account of a lease option going really bad. This is from the investor that put together lease options. This is known as a "Sandwich" lease option where the investor puts himself in the middle. This same issue can happen to any lease option.

This occurred in Utah.

A true lease option horror story:

I hear all the time that what I am about to tell you, boys and girls, can't and doesn't happen. Well it does, and it happened to me.

I remember I was sitting in my office one day and feeling full of myself because I had just completed my 60+ Lease with Option deal. A few months earlier I had placed a young married couple in a property on a Lease Option. I had a Lease Purchase with the owner.

That's what the Gurus tell you to do is do a Lease Purchase with the Owner and a Lease Option with the Tenant Buyer. A Lease Purchase being a one document contract that would give me Equitable claim to the property and a Lease with a Separate Option, or two separate documents, to the Tenant Buyer so that they would have no Equitable claim. The difference being that I could evict the tenant but the owner couldn't evict me, if you will.

Three months after they moved in the wife called me to tell me that her husband had left her for another honey and that she, now pregnant, had no way of paying the rent or to move out. Me, being the nice guy that I am, served her eviction papers. However, her attorney, in looking for his assets, discovered that they were in a Lease with Option and filed a claim of Equitable Interest to delay the eviction.

Now the attorney, hoping to make a name for herself, found an obscure Arizona Law and case president regarding this type of transaction and decided it would be worth a shot. To make a long story short... She was able to stay in the property for a total of 8 months without payment. I was being forced to foreclose on her rather than evict. I didn't have to start the foreclosure process because the seller/owners bank started it for us for a few reasons, one for non-payment and the other for a Due-On-Sale Violation.

Again, it took 8 months to get her out. In the mean-time, her attorney filed suit against me to recover the $10,000 Non-Refundable Option Deposit and any Rent Credits. The Owner filed suit against me for allowing his house to be foreclosed on, which he eventually lost. When both of their attorney's were done with me and we had settled out of court, I had lost everything.

I had to give back all the deposits and rent credits on rents that were never made. I had to pay all their attorney and court costs, I had to pay all the owners as well and make him whole. All my interest in my other Lease Options were now in jeopardy. If they had a claim against me then it would only make sense that they could get a lien or judgment against all my other interest in other Lease Options, and that's exactly what happened.

I was forced to walk away from over a dozen active deals still in place and either start over or give up. I chose to give up and wanted out of the Creative Real Estate Business. Almost two years later I had a friend of mine who knew my story told me about Equity Holding Trust Transfer method. It took me another year before I decided to check out the Equity Holding Trust Transfer method and the rest is history.

That was about 10 years ago. Now with hundreds of Equity Holding trust Transfers under his belt, he has not had one court challenge (and there were very few) that could penetrate the Equity Holding trust Transfer.