Lease With Option to Buy

I was able to secure a release of the cats from the product liability claim asserted by the Jackrabbit and PeeWee for $20,000.  This left the cats with $30,000 from the sale of their marijuana crop to Bowser. I suggested that they set aside $15,000 to pay the taxes that will be due on their profit from the sale.  The cats looked at me as if I had lost my mind.  They said that they had other plans for the remaining money.

The cats had agreed with the Jackrabbit to lease from the Jackrabbit, with an option to buy, five acres of land zoned EFU that the Jackrabbit had inherited from his great uncle, who had passed away bunnyless. The Jackrabbit’s Portland attorney had drafted the documents, which were to arrive the next day.  The cats called their San Francisco attorneys to review the lease with option to buy, but their attorneys were on a two week vacation in Bora Bora. Reluctantly, they asked me if I would review it for them.

I read the documents and noticed that there was a nonrefundable option fee of $10,000 to be paid upon execution of the lease with option to buy, and that the option fee would be forfeited if the cats failed to exercise the option and purchase the property prior to termination of the lease.  The Jackrabbit had the right to terminate the lease if the cats failed to pay any installment of rent within 10 days after the due date or if they failed to remedy any other breach of the lease within 10 days after notice of the breach was sent to the cats.

I asked the cats if they understood that their option fee was at risk if they didn’t pay the rent on time or if they breached the lease.  They responded by asking me if I would please step away from the TV screen, as their favorite program, Dumb Dog Videos, was on. I placed the lease with option to buy on the coffee table in front of the sofa where they were sitting and left the room.

The next morning I overheard the cats talking to PeeWee on the phone asking if she was interested in putting up $10,000 to be a silent partner in their next marijuana growing venture.  They told her that the $10,000 would be applied as an option fee to purchase the property that they were leasing and that there was no risk of loss and that PeeWee would be a part owner of the marijuana crop as well as a part owner of the property when they exercised the option to buy.  PeeWee said that she was interested, but that she only had $6,666 left from her $10,000 share of the settlement as one-third went to pay attorney fees.    The cats scowled at this waste of good money on an attorney but agreed to let PeeWee in on the deal for a much smaller share.  They felt no need to ask me if any of this could present a problem for themselves or PeeWee.

Allen Drescher has practiced law in Ashland and Southern Oregon since 1973.  His practice areas include, real estate and business law, estate planning and elder law.

© Allen Drescher