Refund On Lease/Option Agreement

Added February 12, 2007 by Ilyce R. Glink

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Summary: A young couple had agreed to a lease/option agreement on a new home. After the death of the young woman, the husband is wondering if he can get a refund of the option amount they had paid toward the lease. Lease/option payments are typically non refundable, but a real estate attorney may be able to discuss what options are available.

Q: I found your web site and was very impressed with all the free information. I looked through all the frequent questions in hope of finding an answer to the following question.

My niece and her husband put $10,000 down on a lease/option arrangement seven months ago. Their payments were $2,000 per month. Of that, $1,350 went for the rent and $650 was put toward the down payment.

Unfortunately, my niece suddenly passed away just before Christmas. Is her husband legally entitled to a refund of the option money and excess money paid toward future down payment?

Her husband was not the larger wage earner in this situation and has vacated the property because he could not afford the payments. Thank you for any information you may be able to give me.

A: My condolences on the loss of your beloved niece.

While I'm not an attorney, in the situation that you've described, the renter would not typically be entitled to a refund of the option money in this situation unless the contract specifically said that renters were entitled to get it back in the case of a default.

Option money is usually non-refundable. You're buying an option, or the right, to purchase the property for a specific amount of money at a specific time. If the contract is silent on the issue, then landlord generally keeps the cash.

I will say that the option money was extremely high in this case. I would have never suggested taking an option for much more than $1,000 simply because you never know if you're going to want to walk away from the property.

If your niece was the primary wage-earner of the family, she should have bought life insurance to make sure her husband and any children they may have had were taken care of financially after her death. It sounds like she didn't have any, or enough, life insurance.

You or your niece's husband may wish to talk to a real estate attorney, who can look through the documents they signed and provide further guidance on any legal options that exist.

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