Legal Question in Real Estate Law in California

Re: Option to Purchase Agreement

I'm not sure that they breached the lease. They just decided that they don't want to exercise the option. You might send a certified/return receipt letter notifying them of the cancellation of the option (if the original lease provides for that upon default of the option payment). They're current on rent, so they still will be tenants until the lease runs, unless you make an offer for them to move now that they can't refuse.

Re: Option to Purchase Agreement

Failing to make an option payment may or may not be a breach of contract. You would know better, since you're a party to the contract, but I'd sure look at the terms carefully to see whether that payment was required or merely optional if they wanted to maintain their right to exercise the option. Letting an option lapse isn't a breach of contract, it is merely a permissible election thereunder.

If the option wasn't recorded with the county recorder, I think you only need to give the tenants written notice that you consider the option to have lapsed. Actually, you may not even be required to do that (but refer to the contract language; it may call for a notice to be given).

If the option is mentioned in anything appearing in the title records with the county recorder, you will need to record something indicating that the option has lapsed, unexercised, and probably serve a copy on the tenants. In such a circumstance, you shoud retain a local real estate attorney to assist you with checking the title and preparing a suitable instrument to record.