Q: I signed an option agreement to sell a house, and the buyer also has a separate lease. During the term of the lease, the tenant paid late 3 times but now wants to exercise the option and buy the property. Can I terminate the option?
A: Your rights are controlled by the terms of the option, but most likely you are not going to be able to terminate the option if you never evicted the tenant and their only breach was that they paid the rent late, but they always ended up paying in full. Courts do have a policy of enforcing option agreements as written and a person must perform the option in accordance with its material terms. The most important thing is whether the option agreement clearly states that a breach of the lease results in a termination of the agreement. If such language is included, while the tenant may have paid late, if you never pursued an eviction against them, the lease was never legally terminated. You could argue that it was breached by the late payment, but there was never a ruling to determine the breach; if you get sued by the buyer to enforce the option, a judge could ﬁnd that late payment of the rent, without an eviction, is not a material breach. Whether there is a material breach depends on whether there is an event that frustrates the purpose of the agreement; paying late, but always paying, may not reach this standard. Therefore, there is a lot of risk in terminate the option in such a situation.
By Mark B. Zinman