Lease Option in Las Vegas Question about an Escrow Account?

Question

Im in a lease option and not sure if the owner is on his way into default. The property value is 57k below orginal loan. I have a feeling in may walk away or he may be trying to refi. I dont know he wont contact me. I have tried to contact him and have asked him to send me confrimation of the last 3 months mortgage notes show being paid do this every month. So to protect myself and not just give this guy money every month. The question I have is can I put the monthly note in a escrow account or a bank account to hold the money until I can get verifcation that the owner is paying the mortgage on time. I dont want to pay him and he is not paying the house note.

Answer 1

Check with a lawyer. I'm not a lawyer, so this isn't legal advice. However....

When you signed the lease-option, did the owner sign an "Authorization to Release" form or forms? That's a document that would give you the right to contact the mortgage holder(s), just as if you were the owner, to check on the current status of the mortgage. As an investor, I always have the owner sign an "Authorization to Release" to avoid the very issues you're facing.

Again, I'm not a lawyer. You'll be bound by your lease, your option, and Las Vegas law. However, if you still have a valid lease with the owner, then you must pay according to the terms of the lease. The owner's financial condition isn't grounds for withholding payment (unless your lease or your option specifies that it is...and it probably doesn't).

Check with a lawyer about depositing money into an escrow account. You may be legally able to do so, but I don't see how that's going to protect you at this point.

Let's say the owner is falling behind on his mortgage. Your withholding payment will only accelerate that process. And read the option portion of your agreement; failure to pay on time probably is grounds for revoking the option.

Let's say the owner is current on his mortgage. Your withholding payment could push the owner into foreclosure. And, as above, withholding payment might well be grounds for revoking your option.

In either case, your action--as a practical matter--would worsen the owner's financial situation and probably would result in the loss of your right to purchase the property....along with any option fees you've paid.

Again, check with a lawyer.

Answer 2

Yes do that, He can very well be collecting money from you and keeping it for him self before  he lets go of the house. don't pay him any money until you get proof. the other way that you can find out if he has defaulted on his property is by going on the counties website or call the county and ask for the department that handles this matters. good luck.