Rent to Own Contracts (aka Land Contracts aka Agreement for Deeds) are not generally utilized in Florida by SELLERS for four reasons:
1. Transfer Tax:
The State of Florida views Rent to Own contracts as a transfer of interest. Therefore, the State of Florida collects from the seller a documentary transfer tax on the property as if the property is sold, despite seller does not conveying a deed.
2. Intangible Tax:
The State of Florida views a Rent to Own contracts as borrowed money. Therefore, the State of Florida collects an intangible tax and documentary stamps from the buyer in the same manner as if a note and mortgage involved.
3. Contract Must Be Recorded:
The State of Florida views a buyer’s interest in a Rent to Own contract as an equitable interest. In order to protect the buyer, the contract must be recorded, and in the event of a default, a seller must go through a complete foreclosure process to obtain a clear title.
4. Seller Liability:
Since title remains in the name of the Seller, the Seller is the one that remains liable and is open to potential lawsuits in the event a buyer has a party or guests on the property, and there is an incident.
Rent to Own Contracts (aka Land Contracts aka Agreement for Deeds) are not generally utilized in Florida by BUYERS for three reasons:
1. Transfer Tax:
Since a contract for deed does not require the title work that a traditional contract for sale does, buyers risk buying a property with bad title. Liens may also emerge against the seller that will negatively affect the title during the term of the contract.
2. Bankruptcy:
The seller may also file for bankruptcy or go missing or dying, which would put the property into probate and jeopardize the transaction.
3. Deed Transfer:
The seller could also fail to deed the property over to the buyer after the final payment has been made, which may result in costly litigation.
As a result, there is little to no benefit in Florida to a Rent to Own contract. Whenever possible, I recommend a Seller actually sell and convey title and take back a note and mortgage on the property (aka Seller Financing aka Owner Financing). Seller Financing eliminates the seller from any liability, provides a first lien on the property, and protects the buyer from title and seller issues as well.
Stephen K. Hachey, FSBO attorney, will guide you through the selling process to ensure a smooth transaction. In conjunction with his For Sale By Owner legal services, he can also act as your closing agent and provide Florida Title Insurance.
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