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was to expire June 3, 1991. The Lease Option provided that the
monthly lease payments would equal "the principal, interest,
taxes, insurance and Association dues. (NONE of which is to be
applied towards the purchase price.)" Under the terms of the
Lease Option, the seller/optionor (petitioners) was to "keep
current the existing trust deed loans, taxes and insurance and
homeowners association dues during the entire option period to
the close of escrow." Lee Wood (Mr. Wood) was to be provided
with the necessary documentation for purposes of tax deductions
related to 15 Hastings to be taken by Mr. Wood.
On November 3, 1989, petitioners and the Woods signed a
two-page document entitled "Real Estate Purchase Option"
agreement for the property located at 15 Hastings. The Real
Estate Purchase Option was to expire June 1, 1991. The terms of
the Real Estate Purchase Option were different than those
contained in the Lease Option. The Real Estate Purchase Option
did not provide for lease payments but instead stated that
"optionees agree to pay all carrying costs in respect to the said
property for the duration of the term of this option period to
include: principal, interest, taxes, monthly association dues,
any applicable insurance premiums; optionees further agree to
maintain the property in good repair".
Also on November 3, 1989, the Woods deposited $10,000 with
Escrow Masters as an option fee. The option fee was available to
petitioners at any time following consummation of this option
agreement. On December 1, 1989, petitioners withdrew the $10,000
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