My client wants to enter into a hire-purchase agreement with a potential tenant. A former client`s lawyer has prepared a hire purchase agreement that is similar to the needs of my current client. Can I make changes to the agreement so that it applies to my client`s transaction? In the absence of a fixed price or other evidence that the parties had agreed on the meaning of the term “market value”, a lease-to-purchase disposition cannot be considered a legal call option. See Jarvis, 400 S.W.3d to 650 (on the ground that a “call option” provision in a contract did not provide for an option agreement, since it did not give the buyer the right to force the sale of the property and not to indicate a fixed purchase price). Performance agreements, including lease purchases, are a form of financing by the owner and, therefore, the Federal Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”) and the Texas version (“T-SAFE”) apply. However, the seller only needs a permit if the property is not owned by the seller and/or if the sale is not made to a family member. The commissioner of the Texas Department of Savings and Mortgage Lending (“TDSML”) has ruled that T-SAFE will not be applied to people who make five or fewer self-financed loans in a year. Note that the T-SAFE licensing rule only applies to owner financing. In the past, leasing options and other executable contracts did not have to be registered. None.
Article 5.076(a) states: “Seller shall record the contract performed, including the attached statement … no later than the 30th day following the date of performance of the contract. In addition, any instrument that terminates the contract must be registered. In 2017, paragraph 5.079(a) was amended to provide that a “registered executable contract is identical to a seller`s deed with privilege. Seller`s lien relates to the amount of the unpaid contract price less any legal deduction and may be enforced by foreclosure in accordance with Article 5.066 or by judicial execution. A general warranty is implied, unless otherwise limited by the registered performance contract. However, it would not be wise to speak for the law and simply assume that a registered performance contract is as good as an act. Basically, nothing is as good as a general guarantee deed that simply pays interest on a royalty. Dodd-Frank and the SAFE Act were both born out of the collapse of real estate.
Dodd-Frank typically requires a seller-lender to make an informed decision in a self-funded transaction with a place of residence (including a lease purchase) that the buyer-borrower has the ability to repay the loan. Most sellers are therefore required to qualify the buyer-borrower in the same way as any regular lender. This law also provides for a de minimis exception that excludes persons who do not carry out more than three self-financed transactions per year, at least as long as the seller-lender is not engaged in the construction activity. Although Dodd-Frank has been sharply criticized by some politicians as an example of over-regulation, there is no doubt that corrective measures were needed to avoid another toxic credit outbreak. Because of the onerous requirements and penalties of section 5.061 of the Property Code, a landlord-seller may be tempted to rewrite a traditional hire purchase to call it something else or to give the impression that it is something else. The important point to remember is this: if the agreement is essentially an enforceable contract, then § 5.061 applies – regardless of the title or wording of the document. Judges tend to put substance above form (the “charlatan like a duck” rule). Section 5.062 of the Real Estate Code provides that, for the purposes of Subchapter D only, “an option to purchase real property that includes a residential lease or that is combined or performed at the same time as a residential lease is considered to be a performance contract for the transfer of real property with the lease”. Code § 5.062(a)(2). As we have already seen in this blog, subchapter D contains many pitfalls for sellers in the context of performance contracts. Therefore, leases that include actual call options – including the tenant`s right to purchase the property within a certain period of time – should be treated with extreme caution.
Why does the Texas Legislature continue to reform the Executable Treaties Act? To balance stocks.. .