Does Death Kill the Option?
Not quickly… says Richard Spencer of BPE
I’m often asked whether the death of a legal owner will affect an option agreement that he granted. The simple answer is that the option will not be terminated (unless the contract states otherwise).
However, there may be associated problems with a lender or relatives of the owner.
Lenders
In most cases, a lender will not insist that the mortgage be repaid immediately on the death of the owner. The option holder could simply continue to make the repayments pursuant to the terms of the option.
If the deceased had life insurance, the proceeds may pay off the mortgage. If the mortgage is cleared, the option holder would have an option to buy a debt-free property at the previously agreed Purchase Price.
An issue may arise where a lender learns of the owner’s death and somehow discovers that an option has been granted without its consent. The lender may instigate repossession proceedings for breach of the mortgage. If it obtains an order for possession, it would take the property free of the option and the option holder would lose his right to purchase the property.
Relatives
Relatives will often not know about the option agreement until after the owner has died. They may expect to inherit the property and be upset to discover than an option agreement is in place. The executors will not be able to sell the property, as they will be bound by the terms of the option, which should prevent a sale during the option period to anyone other than the option holder.
A disgruntled relative may want to find a way to cancel or end the option. The terms of the option would not help him, unless the option holder was in breach of the terms of the agreement (in which case the executors might be able to terminate the option). The executors could argue that the deceased owner was coerced or induced to sign the option agreement. The argument would be much stronger if the owner did not take legal advice prior to signing. If successful, the contract could be deemed to be null and void.
In light of this investors do well to ensure that owners obtain legal advice before signing an option, even if you have to pay for it. This increases the likelihood that the owner understands what he is signing. It is also more ethical if you insist an owner has legal advice.
Richard Spencer is a partner in the Commercial Property team at BPE Solicitors. He acts for property investors and developers and has built a strong reputation in dealing with option agreements.
Tel: 01242 248232.
Email: richard.spencer@bpe.co.uk
Disclaimer: Although we endeavour to ensure any information given here is accurate and up-to-date, we make no representation or warranty as to their accuracy or completeness. The material is provided for information only and does not constitute legal or other professional advice. You should always seek appropriate legal advice from a suitably qualified person before taking any action.
Options are about people
The Crock of Gold at the end of the Rainbow is just a fairytale.
But the Rainbow itself is real. You must have seen one glowing brightly after a summer storm. Set against black clouds the effect is dramatic and stunning!
When air-borne droplets bend and reflect light from the sun after a downpour the message is clear and reassuring; storms tire and pass. We can learn much from a rainbow. Consider the process of negotiating an Option Agreement. This can be done clearly and in a way that gives reassurance. Since Options are more about people than property, offers made by phone often fail. A rainbow lives only in the mind of the beholder, so to enjoy its beauty you must be in the right place.
We established during our initial telephone conversation that the Seller is motivated to consider an offer and that the situation lends itself to an Option Agreement. For more information on how to do this visit www.PropertyOptionExpert.co.uk
We have developed trust (remember strong flour from the previous article?) which will help your offer to be accepted. More is involved, though. A rainbow glows only when light, water, air and the eye of an observer work together in a special way. For the Seller to sense that your offer is not too good to be true, but is a real solution, you need to negotiate skilfully. The Rainbow (Seven Step) System
We see seven distinct layers to a well-defined rainbow. There are seven stages to negotiating a well-defined Option Agreement. If you work through them one by one when you visit potential Sellers you will have great success. Let’s look at each stage in turn, starting with red
Motivated sellers and lease options
Have you ever watched bread rise? It’s amazing! Almost magical.
Helping a motivated seller with lease options can be similar. Under the right conditions and with a considered mix of vital ingredients something quite special happens. This is what makes working with Options so rewarding! You can become a highly skilled baker.
You may remember from previous articles, for Property Options to benefit all, we need three essential ingredients – a genuine interest in the Seller, honesty, and the right measure of information. We also discussed how to find those who need the creative solutions you can offer. Do you remember the moth and flame analogy? Or sniffer-dog sourcing? Please feel free to review those earlier articles at www.optionexpert.co.uk
So – your marketing is flying and the phone is red hot! This is where the real fun starts! What are some important things you want to keep in mind when taking calls?
Making Trust Grow
If your option deal is a loaf of bread, then trust is strong flour. Make it grow. The water of communication and the yeast of motivation are also indispensible. A sprinkle of salt will enhance the flavour – humour is always welcome. You’ll need a little elbow grease too.
Some advocate a twenty-four hour recorded message service, answer machines or call centres. I’m not keen. Never underestimate the power of the first point of contact! When Sellers call, if at all possible, answer them personally.
Lease options in practice
By Mark Jackson
Why moths are drawn to a flame is a mystery. But drawn they are. A light in the night can attract them from 70 meters away! Once trapped, the moth can circle for hours, working hard but getting nowhere. More important things like feeding, pollinating plants, or just enjoying life become secondary. Freedom comes when day breaks or the flame dies.
Motivated sellers are similar. What was once appealing and attractive has now become a trap. The emotional cost and energy spent can be huge. They need to move on.
Motivated Sellers
Emotion is the mother of motivation, not logic. A situation which has become emotionally charged and draining needs resolving. A Seller is motivated strongly when uncertainty or the fear of being trapped or unable to cope, or simply the desire to move on, becomes overpowering. “Motivated” means the mind of the person you are talking to right now is full of how to sell the house. They need peace of mind, certainty and freedom. Lease Options are brilliant for giving that, allowing the homeowner to start enjoying life again.
Your aim is to help the moth move on. Motivated sellers will be attracted to your solution and away from the flame, and do not need to be manipulated, persuaded or convinced. Lease options are a breath of fresh air, powerful enough to blow a flame away.
Here are 4 situations where Lease Options can really shine.
Freedom with Options
Tomatoes change with time. Green ones are toxic. Red ones are not. Timing is key. Imagine being able to harness that! You Joint Venture with Time to transform something toxic into something healthy. Property Options can empower you to do just that.
Options are agreements which give the holder freedom. Depending on the wording, the Owner grants you exclusive freedom to buy, use or sell the Property, or a combination of these freedoms. Options are powerful, simple to use and flexible. With an Option, a splash of creativity and a genuine interest in others “toxic” property can magically become healthy! Skilfully weaving such simple solutions brings wealth running.
Tomatoes need more than time to blush. Warmth, light and water are all essential. It’s the same with Options…
For your efforts to bear fruit experience shows the Vendor must like you. There must be warmth in the deal. Create it by listening, asking the right questions, and holding a genuine desire to help the person who needs what you have. Only if you appreciate their motivation for selling, (the “Why”) will there be trust and warmth. If the Seller is not sold on you, walk away.
