- This video is all about
Purchase Lease Option legal advice.
Now my name is Simon Zutshi.
I'm the founder of the
property investors network.
I've been investing in
properties since 1995
and I'm the author of Property Magic,
the Amazon No.1 Property
Bestseller.
Now, of course, I can't
actually give you legal advice
because I'm not a solicitor.
But what I can do is educate you around
some of the legal matters
involved with Purchase Lease Options.
Now the first question people ask me is,
"Are Options legal?"
Well, yes, they absolutely are legal.
They've been used in English
law for many, many years.
Right now in Scotland,
the law society up there,
doesn't like Purchase Lease Options.
So you can't do Options in Scotland.
Instead we do something called an Exchange
with a Delayed Completion.
It's similar to an Option, but an Option,
you have the Right to Buy
but not the obligation to.
When you do an Exchange Delay Completion,
or called an EDC,
you are committing to buy the property.
So only do those if you're
definitely going to buy.
Make sure you've got your
finance lined up, okay?
And there are a few places
around the world also
where PLOs are not accepted.
A couple of places in Australia,
a couple of places in America as well
on a state-by-state basis.
But generally this strategy
works everywhere in the world.
Now, I often know an amateur investor
because they come to me and say,
"Simon, can I have the
legal paperwork for a PLO?"
Well, here's the thing.
You don't need the legal paperwork
because you should not be
putting the paperwork together.
It's very important when you
do a Purchase Lease Option
that you must get a solicitor
to do the legal contract for you.
After all, this is going to be
a valuable property deal for you.
You can get cash flow and
potential equity growth
from a property that you don't own.
And that means you don't have
to put in a big 25% deposit.
It means you don't have to get a mortgage.
So it's worth spending a bit
of money with a solicitor
to get the right kind of contract.
Now this is a slight challenge as well
because many solicitors
don't actually know what a
Purchase Lease Option is,
let alone know how to
put a contract together.
And if you went to them
they'll either say,
"Well I've never heard of that,
I don't think you can do it."
Or, if they're a bit
more open minded and say,
"Well okay, I don't know
that, but I can do it for you.
It's going to cost you four grand,"
because they've got to and go learn how to do it.
An Option Agreement should
cost anywhere between
£600 maybe up to about £1000
depending what kind of
solicitor used to do it.
And the best way to find
a solicitor who can do it
is through word of mouth.
So go to property events.
Go to the property investors network,
monthly network meetings
all around the country.
You can go to pinmeeting.co.uk
and ask around.
Find out who are the people there using
to do Purchase Lease Options.
So, use your solicitor to
do the paperwork for you.
What you do need to need to
do, is you need to put together
what's called the HOTs.
The Heads of Terms, HOTs.
Now what that is, it's
the details of the deal
you have agreed with the
owner of the property.
So the HOTs, you could just literally
write it on a piece of paper.
It's your name and address,
their name and address.
The address of the property
on which you're doing the Option.
The agreed purchase price.
The length of the Option term.
The Option fee you're paying them.
Any monthly Options fees to
be able to use the property.
And any special conditions.
Look, if you want to change
the kitchen in the house,
it's much better that
you agree that up front
rather than trying to do
it two years down the line
once you can't get hold of the owner.
And your solicitor will do things like,
they'll get a power of attorney for you.
So if you want to exercise
the Option, you can do that.
They'll make sure that if 
you want to have a restriction
on land registry, you can do that,
so the owner can't refinance
or sell the property,
because you've got the
option to control it.
So your solicitor takes
care of all those things.
You don't need to do it
as long as you use the correct solicitors.
It's also very, very
important to make sure
the seller
has independent, legal representation.
Because we want to make
sure they are fully aware
of what they're agreeing to.
We're not trying to trick
anyone or con anyone
or pull the wool over anyone's eyes.
We want to find someone for
whom a Purchase Lease Option
is a great solution for them
and also a great solution for us.
If they get independent
advice the solicitor will say,
"Look, do you realise you're
signing something here
that says that it might
be worth $200,000 now,
but they can buy at any
time in the next five years,
and it might be worth substantially more,
but you're only going to get
the $200,000 you agreed."
And they'll sign and say,
"Yes, I understand this."
And the reason they do that is,
they just don't want the
hassle of that property.
They want to get away from the liability.
They're happy for you
to come and take it over
and you're happy to do it
because you get cash flow on
the property in the meantime.
Then you get to buy the
property in the future.
If you want.
You can walk away.
Remember, you've got the right to buy,
but not the obligation to do so.
So when it comes down to legal matters
and Purchase Lease Options,
there are a couple of things
you need to be aware of.
First of all,
you don't want to be doing
the paperwork yourself.
Get a solicitor to do that for you.
You need to have a solicitor
and the other people need
to have a solicitor as well.
You need to make sure the
solicitors know what they're doing
and understand Purchase Lease Options.
So get a recommendation,
maybe a local network meeting,
from other investors who
are doing this strategy.
Find out who they use.
What you do need to have
is the Heads of Terms.
That's a basic agreement saying
exactly what the deal is.
Don't expect the
solicitors to talk together
and agree the deal.
You need to present them
with the Heads of Terms
that says exactly what the deal is.
So using Purchase Lease Options,
one of my favourite strategies,
I think it's a great
strategy to use right now.
Be aware, they don't work
in every circumstance.
They only really work
if the seller doesn't need
the money from the sell now.
If they need the money now,
an Option is not going to work,
because they're not
going to get the money now.
It's maybe a three to five year contract.
They might not be able to wait that long.
So only use Options when
they are appropriate.
But when they do work,
when they're appropriate,
they can be an incredibly
powerful tool to offer true,
genuine, win-win solution
for everyone involved.
I do hope you found this video useful.
Please do comment below.
Ask me any questions you want.
That's how we work out
what other videos you want us to create.
If you like it, share
it with other people.
Maybe you wanna subscribe
to the channel as well.
So my name's Simon Zutshi.
I encourage you to invest with knowledge,
Invest with Skill.
Thank you.
