Did A Lease Amendment Terminate The Tenant’s Option to Buy Real Estate?
When does an offer become a binding option to purchase real estate?
Under Florida law, a binding option to purchase real estate requires money to support it – otherwise, it is just considered an offer and can be withdrawn or revoked at any time.
Case review: Laroche v. Nehama, 979 So. 2d 1021 (Fla. Dist. Ct. App. 2008)
A muddled option agreement
In LaRoche, Claude LaRoche offered to lease his home to Francois Nehama. The lease was a two-year agreement, with a required security deposit and first month’s rent due at the signing. LaRoche offered Nehama the option to purchase the house after the two-year lease ended, and it required Nehama to notify LaRoche in writing of his intent to purchase at least ninety days before the lease ended.
Before the lease even began, both LaRoche and Nehama amended their agreement. LaRoche decided he would stay in the house and in return, Nehama would be allowed to live there without paying rent. After they signed off on their new agreement, they signed a cancellation agreement for the original.
This is where things got confusing. When LaRoche signed the cancellation agreement, he thought it cancelled the entire transaction, including the option to purchase. On the other hand, Nehama believed it would cancel the lease, allowing him to retrieve his security deposit, but that the option to purchase was still on the table. This led to him refusing to accept the cancellation agreement and exercising what he believed was his right to buy the property.
A judgement was entered in Nehama’s favor for the option to purchase LaRoche’s home.
LaRoche appealed this decision, stating that even if the option to purchase somehow survived the cancellation agreement, there was no money to support the purchase offer. Nehama continued to argue that the option to purchase survived the cancellation agreement.
Citing Donahue v. Davis (Fla. 1953), the appellate court found that a binding option to purchase real estate requires money to support it – otherwise, it is just considered an offer and can be withdrawn at any time. In the original agreement, Nehama was going to pay rent to LaRoche for two years, but when the agreement was amended to terminate Nehama’s obligation to pay rent, there was no money to support the option to purchase. Instead, it became just an offer, which LaRoche withdrew before Nehama had accepted.
Quick Tip: When a tenant is negotiating a lease with an option to purchase, he or she should make sure the landlord agrees to credit some of the rent towards the down payment or the purchase price.
What Should You Do?
A good piece of advice if you are faced with any of these issues, is to at least speak with an experienced Florida real estate lawyer to learn about your rights under the law. Most real estate lawyers, like Bruce R. Jacobs, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
Do you have questions or comments? Then please feel free to send Bruce an email or call him now at (954) 961-1993.