Is it legal if I would like to buy a condo/townhome/house and rent to a friend with a lease option to become co-owners while being co-occupants?
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Is it legal if I would like to buy a condo/townhome/house and rent to a friend with a lease option to become co-owners while being co-occupants?
My friend has no down payment and not-so-great credit due to mistakes she made nearly 7 years ago. I want to purchase a home and we would like to be roommates, while she pays rent as a way of purchasing part of the home from me. We would each pay half of the mortgage and expenses and she would pay a bit more each month until she paid me half of the down payment. Can we do this legally and without much trouble? How?
Asked on June 18, 2012 under Real Estate Law, Colorado
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Rent to buy options are legal, and it is legal to buy a property then rent it, sell it, or rent-to-buy it to someone, even if that person has bad credit. So long as you do not misrepresent anything to the bank (e.g. you get a loan by saying you have a tenant with good credit lined up, when that is not true). from a general legal standpoint, you'd be fine.
However, if you are buying something that is part of community or development, you also need to be cognizant of any community rules or restrictions--it is legal, for example, for a community to bar leasing or lease to own transactions and require owner occupancy. Therefore, be sure to check on any community restrictions (e.g. contact the HOA if any) prior to your purchase.
Finally, it would be good idea to, when you've identified a likely property, to consult with a real estate attorney before purchasing it, to discuss your proposed transaction, have him/her help you make sure there are no restrictions, and also help you structure your transactions in the best way.
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