You and Your Partner Broke Up, What Happens to Your Lease-Option?

May 12, 2018 by Marty Orefice | Contracts, Real Estate, Rent to Own

Your rent to own contract isn't void just because you broke up with the person you moved in with.
Moving in with someone isn't a sure sign of a successful relationship. When you sign a lease-option together, a break up can leave you asking lots of questions about what to do with the lease.

Your rent to own contract isn’t broken just because your relationship is. So, what happens when you and your ex signed a rent to own contract and you’re no longer together?

Your Seller Doesn’t Have to Take Anyone’s Name Off the Lease

Judges don’t have the right to cancel a lease as part of a divorce. Judges have the right to assign the lease to you or your ex. However, if you both signed the contract, your landlord (in this case, the seller) doesn’t have to take either of you off if he or she chooses not to.

The seller approved you and your ex for the rent to own deal, not just one of you. Rent to own sellers also play the role of landlord. Most landlords follow the 30 percent rule, which means that an affordable monthly rent should be less than 30 percent of your monthly income.

Removing one person from the lease could cause rent to become unaffordable (i.e. more than 30 percent of the income of the person living in the property). Therefore, the landlord may want to keep both of you on the lease as a means of safeguarding his or her investment.

That means that your both responsible for the monthly payments even if your not both living there. Ideally, the person living in the home will pay the monthly rent. However, it’s important to note that if that person living in the home fails to pay, the other person on the lease can be held legally responsible for rent payments.

As a resolution, you could sign a hold-harmless clause, which clarifies that while both names are on the lease, only the person living in the property should be responsible for the costs related to living in the property. However, it’s up to your landlord/seller to agree to the clause or not.

Another solution is to find a way to break the lease. The seller may be willing to let you walk away from the lease early if you pay a fee to break it. Your contract may even have a clause already in it about breaking the lease early. Read through your contract to know for sure. Then, compare the fee to what the costs of carrying out the lease term are.

Who Has the Right to Purchase the Property

If both you and your ex signed the rent to own lease agreement, then you both have the right to purchase the property before anyone else. But who takes priority?

The fair thing would be for whoever is living in the home to take priority for purchasing it. However, legally, your rights are equal. Therefore, it will likely come down to whoever offers to buy the property first. However, that's not written in stone. The seller makes the ultimate decision. He or she will likely want to make the full profit from the home as soon as possible, and that's why it's probably first come, first serve. Nonetheless, the seller might take a different preference based on personal reasons.

To avoid confusion, it’s best to sign an addendum to the lease agreement. In the addendum, one party should relinquish his or her right to purchase the property. Talk to your lawyer to draft an addendum or inquire about other options.

Discuss who benefits from the option fee and any premium payments with your ex. Once you’ve reached an agreement, include that in your addendum so that there are no legal questions down the line. If you can't reach an agreement, talk to a family law attorney to find out what the legal solution is. Likely, what's fair is to split it half and half between you. Nonetheless, if you supplied the entire option fee with your savings, it would be fair that you keep the full option instead.
Woman and Man Sitting On Brown Wooden Bench by Vera Arsic is licensed under the Pexels Photo License.

Marty Orefice

About The Author

Marty Orefice

Martin Orefice is a real estate investor who has been in the industry for over a decade. He has experience with rent to own deals from all sides—as a buyer, seller and investor. He created RentToOwnLabs.com to provide the #1 resource where people can find information about all things rent to own.

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