From: The Shadow 
Newsgroups: misc.invest.real-estate
Subject: Re: Lease Purchase Option not exercised - now what?
Date: Mon, 19 Jun 2006 10:32:29 -0400

option fee is non refundable, you are purchasing the option to buy 
property at a certain price in a certain time frame.

as for the rent credits, I just don't know.

agsf_57@yahoo.com wrote:
> This question was asked but not answered and when I went to draw up one
> of these contracts for a friend of mine, he asked what would happen if
> the tennant would walk away. I was like, I never had a tennant walk
> away, because they usually spent a lot of money fixing up the place to
> their liking. But it is a valid question.
> 
> Ok, in a deal like this:
> 
> option fee = $2000
> monthly payment: $500 = $400 rent, $100 torwards down payment
> 1 year lease
> 
> So a year goes by and the optionee decides not to exercise his option
> because he/she decided to move back with their ex . The optionee is out
> the $2000, but what about the $1200 (12x$100)?
> 
> This important because as an optionor, you have to pay capital gains
> tax on the $400/month but you don't pay taxes on the $100 until you
> sell the place (assuming you don't do a 1031 exchange or protect
> yourself in other ways). I assume the $1200 gets refunded back? or is
> this legally negotiable?
> 
> By the way JC, you are generous, I pocket the option fee and don't
> credit it to them at closing. But then again, I do tell them how to
> clean up their credit and how to make money in real estate with no
> money down and no credit. They eventually become very good bird dogs
> because people of a certain financial status tend to stay together.
> 
> Regards...
>