Legal Question in Real Estate Law in California

I'd be inclined to think the owner may do so, unless the option prohibits such transactions, or (possibly) unless the effect of the refinancing is to impair the owner's ability to perform. A cash-out refinancing would normally be harmless and not impair the optionee's rights. However, if a comparison of the market value, the option strike price, the debt secured by the property, and the depth of the owner's pockets together indicated a significant impairment of the optionee's rights, i.e., that the owner/optioner might be unable to perform by delivering clear title upon an exercise of the option, the optionee may have a good case against the owner/optioner. I was not able to locate any California case on point, but the principles seem sound.

Read your written contract, it determines the answer to all such questions. It is HIS property until you exercise the option. If refinance or encumbrance is prohibited, then you may have a claim Besides that, how would his refinance affect your purchase unless your purchase option price is less than the total of mortgages and liens??