I have a property that a “friend of a friend” started purchasing from me about 3 years ago. This property is on a land lease, so I own the building but not the ground.
This person was in a very tough financial situation, so I agreed to basically let them rent-to-own the property. They make a payment to me each month that will eventually (over 10 years) pay the mortgage on the property. Financed through me, obviously, not the bank or any other institution.
I recently found out that they have moved and are now renting this property out to someone else. Do they have a legal right to do this without my consent? They haven’t transfered the property to this person in anyway, but simply let them live there for a monthly payment.
Depends on your jurisdiction and the lease, but the majority rule is to favor assignability of interests in land. This stance is reflected, for instance, in the similar (but not identical) set of facts presented in the Rule in Dumpor’s Case.
The GQ answer is, you’ll need to look at the paperwork to see if it explicitly forbids this sort of thing. And consult with a lawyer also if you want to take any action.
The question however is, do you want the property back? Are you still receiving your payments every month? Would the property be easy to unload if you did repossess it somehow?
Or would it be a pain, and you’re just as happy receiving the payments as agreed?
Does the lease agreement you have with the first party have a sublet clause in it?
If it allows for subleasing, and the first party has a lease agreement with the second party, then there’s nothing you can do about it. If they don’t have a lease agreement, then the first party is breaking your lease.
If your original lease agreement does not have a sublet clause, then the first party is breaking the lease, and the second party is squatting even if you’re getting rent paid to you, without the proper chain of lease and sublease.
Your understanding is not correct. If the lease is silent as to subleases and assignments, the majority rule is that the lease is sublettable/assignable. If there is a sublease/assignment clause that requires the landlord’s consent, then the lease has been violated. I’d find it extremely unlikely that there is no agreement between the original lessee and the current occupants. I suspect you mean “written lease,” and while the form of documentation has implications for enforcement under the statute of frauds, it does not affect the lessee’s right (or lack of right) to sublet/assign his leasehold.
It also occurs to me that if it was clear (and known to third parties, not just RYBTP’s word) that it was being ‘sold’ on a rent-to-own basis at below market value as a mode of helping a friend in financial difficulties, and that situation has changed, there may be grounds for challenging the subletting even without explicit language forbidding it. IANAL, but I seem to remember cases where an instance of prior generosity was not held by the courts to be binding on future situations. I’d love to see one of the Dopers-at-Law take that into account.
The answer to your question is going to revolve around how the lease to own agreement is structured and it’s specific language regarding assignability. Even the simplest lease to own agreements generally address this in some form or fashion.
As a side note you sound somewhat exercised by this sub-letting. Why? Assumedly the original lessee (your hard luck pal) is still legally responsible for the lease. “Lease to own” agreements can take several forms and there are scenarios where the lessee can lose their potential equity by violating the lease terms. How is this agreement structured? Your description makes it sound more like a privately held mortgage note than a lease agreement.
There is no language in the contract in regards to subletting. The only language used states that they may not transfer ownership–which they haven’t.
Astro, the reason I’m a bit upset about the situation is that this person’s financial situation is greatly improved and they have the ability to pay off this loan in full if they chose to. We basically had a gentleman’s agreement that this would be the case if his situation turned around.
He isn’t making any money off the deal–that I know of, but I would certainly like to have the balance paid in full if possible rather than the very small monthly payment that I currently receive.
Assuming you are in the US, from a tax perspective it might be significantly to your benefit to continue to take the payments over an extended period of time, rather than receive the payoff as a lump sum. If you need the money now simply address the issue with him so you’ll know where you stand. If he has to get any financing to pay you off you should be aware that while interest rates are still fairly low (historically) down payment requirements by banks are pushing 20-25% in many cases which makes getting a loan significantly more onerous than it used to be. If he has an agreement to pay you over time I don’t think he would be inclined to pay off the loan unless your interest rate is a lot more punishing than the banks.
No, you didn’t.
Not unless this ‘agreement’ was put in writing into the lease.
And if you made a verbal agreement after doing the written lease, that has no validity. It’s a principle of law that a written agreement can be modified only by another written agreement – not a verbal one.
Apparently you don’t know what a gentleman’s agreement is, i.e. a personal agreement based on honor and not legally binding. That would be the very definition of what he had, and I would be very wary of taking the advice of somebody who doesn’t know that simple term.
Oops. That came probably came across as quite rude. All I meant to imply was that I find it rude when someone corrects someone else, but doesn’t make sure they are right, first. I mean, all I had to do was look up in a dictionary. I wouldn’t dare tell someone they were wrong without doing the research first.
But, I guess it’s also possible that research was done, and that the person got the opposite conclusion. Again, I’m sorry if I offended. That was not my real intent.