Contracts For Deed / Lease To Purchase Q&A

Last Updated on Friday, 3 June 2022 02:22 Written by Chris Griswold Friday, 3 June 2022 02:22

Message From Chris….

The real estate world sometimes uses terms like “contract for deed,” “lease to own,” “rent to own,” “lease to purchase,” and/or “lease with an option to purchase.”  We’ve all heard of these.  They’re actually all synonyms though, legally speaking….  What do they really mean?

There’s a lot of misinformation out there about these arrangements, and I’ve gotten a lot of calls on these lately, so I address them this month.  When interest rates rise (as they are doing), this form of financing to “get deals done” becomes a large player in the deal financing arena, as some buyers want to avoid otherwise higher, market-rate interest rates and/or can’t qualify for a bank loan….  Few things keep the Court system as alive and healthy as divorces and these arrangements.

Note:  While this piece admittedly covers the issues faced more by a Seller/Landlord, it doesn’t necessarily make a Buyer/Tenant happy either to learn that they already own something they thought they were just leasing (especially in terms of general liablity to the public, insurability issues related to such liability, tax liabilities, etc…).  Everybody take note….

Contracts For Deed / Lease To Purchase Q&A

  1. I’ve heard these terms used a lot, but what are they really? They’re something the law calls a “contract for deed,” and the law views all of them the same way; no matter what you call them; no matter how you try to characterize or label them in your deal docs….
  2. How does the law view them? No matter what they’re called, they’re viewed by the law as a conveyance and sale.  This means that the person purporting to be the “landlord” has, no matter what they meant to do, in fact, “sold” their property to the person purporting to be the “tenant.”
  3. Why do “Landlords/Sellers” agree to do these conveyances?  Whether to get the deal done more quickly or to circumvent a would-be-tenant’s inability to otherwise get their own real, ortodox, deed/note/mortgage/loan from an institutional lender (excluding sellers that own their property debt free, with no encumbrances filed of record), some sellers entertain the prospect of “renting” their property to a “tenant” with the understanding that the “tenant” ultimately pays off the note and then “owns the property.”  However, this isn’t as easy as it sounds….  Why?
  4. What are the complications with these conveyances? Oftentimes, the “tenant” defaults.  So?  Afterwards, the “landlord” goes to evict the “tenant.”  Once things go to Court, the judge politely tells the “landlord” that they can’t evict, instead, they have to foreclose on their property to reclaim possession, because the arrangement was a conveyance and sale, not just a lease.  And foreclosing is a much longer, more expensive process than an eviction.  See the problem??  
  5.   What are other complications with these arrangements?  Unless the property is completely paid off, something called the landlord’s/seller’s “due on sale clause” in the landlord’s/seller’s loan docs (with their own lender) will be violated.  This means that, once the landlord’s/seller’s lender finds out about the “sale,” the landlord/seller has to pay off their own lender immediately because they’ve now sold their property to the “tenant.”  And everyone’s hope that the lender won’t find out lasts until about hail season, when insurance companies begin paying out roof replacement claims as people struggle over who “actually owns the property.”  See the problem??

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“I have been extremely pleased with the legal services provided by Chris.  He is an expert on real estate issues; devotes immediate attention to our needs and follows through with all required action.  I look forward to a continuing relationship with Chris.”
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The information presented within this article is of a general nature and is not intended to be relied upon as legal advice in any particular matter without first consulting qualified counsel.

Chris Griswold, P.C.

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Materialmen Lien Law – Q&A

Last Updated on Wednesday, 19 January 2022 11:44 Written by Chris Griswold Wednesday, 19 January 2022 11:44

What if someone doesn’t pay for work done to their property?  When that happens (even before that happens), there are certain things and timelines that come into play.  Since this type of situation is all too common and affects everyone in the business world – it’s probably good information for everyone.  Hopefully, this month’s article on materialmen lien law proves helpful to contractors, bankers, lenders (and other creditors), those in title insurance, landlords, tenants, realtors and many other fields.

Materialmen Lien Law – Q&A

 

1. Are there any prerequisites to later filing a lien on a job?Yes, depending on the facts, a lien cannot later be filed on someone’s property (including a tenant) for non-payment of work unless certain things were done beforehand.

2. What facts create prerequisites?  If the person performing the work is a subcontractor.

3. If the person or entity performing the work is a subcontractor, what timelines must that subcontractor be aware of?  That subcontractor must “pre-lien the job” (which means mail a certain notice to the property owner or landlord) within 75 days of performing the last work or providing the last materials at such job – unless it’s a residential job.  Furthermore, a lien must also later be filed upon such property within 90 days of such last date of work or provided materials.

4. What if the person or entity performing the work is a general contractor?  In such an event, there is no pre-lien requirement.

5. As a general contractor with no pre-lien requirement, is there still something that must be done if a job goes unpaid?  Yes.  A lien must still be filed on the job by no later than 4 monthsafter such last date of work or provided materials.

6. Once a lien is filed (whether as a subcontractor or general contractor), what is the timeframe within which foreclosure of such lien must be sought, or lost?  1 year.

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VARA

Last Updated on Tuesday, 23 March 2021 08:05 Written by Chris Griswold Tuesday, 23 March 2021 08:05

Q:  As Oklahoma City and Tulsa grow into world-class cities, more and more high quality, unique and beautiful art work is sure to begin to appear in hotel and office lobbies, convention center halls, and other public areas – thus making relevant the Visual Artists Rights Act of 1990 (“VARA”).  What is it?

A:  Except for instances, among others, in which: i) the artist(s) of the work are employees of the person or entity commissioning the work; thus making it a “work for hire” under VARA, ii) the art work is an advertisement or promotional material, or iii) the art work is a work of nature (like a flower bed exhibit, which has no copyright protection, thus no VARA protection), VARA “…protects both the reputations of certain visual artists and the works of art they created.  It provides these artists with the rights of ‘attribution’ and ‘integrity’…,” which are the artists “moral rights.”  Carter v. Helmsley-Spear, Inc., 71 F.3d 77 (2d Cir. 1995).

Q:  What type of art work does VARA protect?

A:   Works of visual art like drawings, paintings, sculptures or photographs produced for exhibitions which are open to the public.

Q:  What sort of quantities of art are protected under VARA?

A:  Those existing in either one, unique, single copy or a limited edition of 200 prints or less.

Q:  What “rights” of the artist does VARA protect?

A3 of them:  1) the right of attribution to the artist (as being the work of such artist and the right of the artist to be recognized for creating it), 2) the right of integrity (which the artist has created in and through the ‘arduous’ process of creating such work), and, in the case of works of visual art of “recognized stature,” the right “to prevent destruction” of the art work.

Q:  Does the art work need to be registered under copyright law to have VARA protection?

A:  No, and the artist can still obtain basically the same copyright law protections as under VARA – without such copyright registration.

Q:  How does a building owner, property manager and/or a city council protect itself from artists later making claims against them (due to the eventual removal and possible destruction of the artwork), and how long does such protection for the artist last?

A:  For works created on or following June 1, 1991, they all should, for as long as the artist remains alive (or until the last of all contributing artists die), get a written, signed waiver of the artist’s (or artists’) rights under VARA.

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