Lease Options - Why not?

[Steve R]

Hi all,
Just curious, i have been looking at the idea of entering into lease option deals for purchasing properties in Victoria. I have heard that they are no longer viable as the state revenue office still want you to pay stamp duty on the contract of sale. Which after speaking to the state revenue office for Vic this afternoon i find to be correct.
However, while i was speaking to them i asked them about purchasing properties under a lease option agreement and the implications of paying the stamp duty on the sale of contract being signed. I was informed that stamp duty isn't due until settlement, not on the signing of the sales contract.

So my question is, why couldn't a lease option be structured so that you sign a conventional lease for the property with an option to purchase at a given date in the future, say 5 - 10 years, sign the contract of sale but the contract of sale only comes into effect after the option period or, is this how it works anyway?

This still seems to be a win win for everyone involved or am i missing something?

 

[Scott No Mates]

Hi all,

So my question is, why couldn't a lease option be structured so that you sign a conventional lease for the property with an option to purchase at a given date in the future, say 5 - 10 years, sign the contract of sale but the contract of sale only comes into effect after the option period or, is this how it works anyway?

This still seems to be a win win for everyone involved or am i missing something?

I have seen it done for commercial property eg: Rent for 3 x 1 yr @ $1,000,000 pa then option to purchase for $500,000

(Pretty much a done deal if the purchaser is prepared to pay over the odds for the rent hence a low purchase price not to mention other advantages.)

 

[Steve R]

Hey Scott & anyone else,
What about residential housing? Why couldn't this same strategy work for a distressed vendor or investor?
I was recently told by a legal eagle that residential lease options were effectively dead because of the stamp duty issue, but if the stamp duty doesn't need to be paid until settlement then i don't see why it wouldn't work with the right vendor.
Any other thoughts?