lease option to buy expired. How to proceed with tenant
I have a property that I did a lease option to buy about 3 years ago.  Today was the deadline for them to tell me if they are going to buy the property for the amount we agreed 3yrs ago.  Property is now worth $1-200k more than agreed price.  Also part of the original lease part of monthly payment goes towards purchase price but is agreed if they do not buy they do not get that back.  Now that the option deadline is up I am not sure how to proceed.  Has anyone run in to this before?  Not sure how to move forward.  DO I be nice and offer an extension or just move forward with renewing lease with them?
[{"id": "hv1zgqd", "text": "1. what does your contract say?  does it require reminders or legal notices? do that, obviously if it does.\n2. if no communication is required, me personally as a non lawyer, I'd still send them a certified letter with a copy of the contract and the relevant section highlighted, saying, hey thanks for your business, we've enjoyed having you as a tenant but please keep this formal acknowledgement that the date has passed and therefore per the terms in paragraph blah blah blah, you are now no longer on \"rent to own\" or whatever you called it, but still remain a valued tenant.  Your current lease term will expire on (date) and at that time we expect that your renewal offer will be ($y) or you can renew now for (y minus 5%) ... etc", "replies": [{"id": "hv247l2", "text": "This all the way. You can offer on a cap rate basis after the new lease or extension is signed.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hv24vm5", "text": "Some more info would be great. Did they happen to forget about it? Not a lawyer opinion, you probably have a right to keep the payments &amp; sell the property for more, but that doesn't mean they won't potentially fight about it with you, in court. Maybe their desires changed &amp; they don't want to purchase the property, or they don't have the funds/unable to buy it.", "replies": [{"id": "hv264jg", "text": "they most likely forgot about is what I am thinking", "replies": [], "depth": 2}], "depth": 1}, {"id": "hv2byae", "text": " Everything is in the contract. Sounds like you can proceed with renewal and just offer a new Right at a higher price if you\u2019re inclined.", "replies": [], "depth": 1}, {"id": "hv2d1ht", "text": "Tell them politely the option has expired and if they'd like tp purchase they'll have to pay fair market value with appreciation in mind.", "replies": [], "depth": 1}, {"id": "hv2fldb", "text": "Speak to your attorney before speaking to the tenants. It sounds like you will just be renewing them as tenants without an option going forward.", "replies": [], "depth": 1}, {"id": "hv2hnoh", "text": "Why would you offer them an extension and cause yourself to essentially lose $1-200k? If you were not required by the contract to give any reminders and the date by which they can exercise their option has passed, sounds like they are shit out of luck if they wanted to buy it for the option price. You\u2019re not ethically required to be charitable here.", "replies": [], "depth": 1}, {"id": "hv33xdg", "text": "Be nice and offer an extension.  It\u2019s a new deal that either they sign or they are out of luck.  Claw back some of that appreciation value stepping up over time. Original deal + 50k.  Steeping up 10k each month. Sure, you don\u2019t have to and you may sleep well at night going by the letter of the contract.  But the intent of the arrangement and the tenants payment history probably earns them the benefit of the doubt.  Add some to the original amount and offer a 90-120 day extension.  \n\nAnother option to be nice would depend on the value of what they paid to secure the option over the term.  Was it 5k or more like 50k?  If it\u2019s like 5k then that\u2019s Pennies compared to the appreciation gain so just give it back as a free rent credit and write it off.  Or you could give back a discounted amount.  If it\u2019s closer to the appreciation gain then this option doesn\u2019t really work. \n\nAlso, talk to your lawyer before doing anything or saying anything to the tenant.  A lawsuit could eat your gain if it comes to that.", "replies": [{"id": "hv3k6zy", "text": "This guy is the tenant lol", "replies": [{"id": "hv3kgw7", "text": "We all are at some point.", "replies": [{"id": "hv3txjr", "text": "Look at it from this perspective:  what if the tenant did call the option to purchase at a value $200k below market.  Do you think they would go to the landlord/seller and say, I know we had a deal that actually turned out to be about $200k below market but I want to be fair and only pay you $50k below market?  I think most tenants wouldn't do that.  They would go by how the contract is written.", "replies": [{"id": "hv4s7w1", "text": "I hear you. It\u2019s good to think from the opposite perspective.  I agree no tenant would do that. \n\nBut you are missing the intent.  The intent of the original option was to lock in the purchase price and pay towards it every month until ultimately buying it by a specific date.  That was the whole point of it.  When both parties signed it, they didn\u2019t know it would be 200k below, they both thought it was a fair price. \n\nSure, the option expired yesterday according to the letter of the contract. Seller could walk away and be fine.  But missing the date of something they signed years ago, and pay monthly towards, is most likely an oversight by the tenant. Human error.  Giving them the benefit of the doubt in one way or another is the right thing to do.  \n\nIt comes down to values in the end.  While one could take the money and run, I value trying to do right by people and that means giving them the benefit of the doubt. Especially those who have paid on time and been good tenants. Although, I would make them pay something extra to extend the option.", "replies": [], "depth": 5}, {"id": "hv4ssxe", "text": "Also, the seller is in a good negotiating position to an extent.  They can walk away with both the property and the amount the tenant paid to secure the option (the partial down payment).  The tenant could lose everything.  The tenant would likely take any deal the seller was offering as long as they could afford it.  Even if that means resetting the purchase price to current fair market value and extending for another term.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hv3jz1n", "text": "Having a fixed price in the Option to Purchase is never a good idea!\n\nEdit:  unless you are the tenant/buyer.", "replies": [], "depth": 1}, {"id": "hv55299", "text": "Was this a distressed asset? I would never recommend a landlord to offer such a deal.\n\nHonestly it sounds like there's nothing to proceed with. Continue to collect rent, do not offer them such a nice deal unless you're actively trying to get rid of this building at all costs for some reason.", "replies": [], "depth": 1}]