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Lease Purchase Agreement

2 signers
1Lessor
2Lessee
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There are several ways to become homeowners. For some people who want more flexibility with renting and purchasing properties or buying a new home, you may consider utilizing a lease-to-purchase agreement. In many cases, leasing may be necessary for buying a house which otherwise would never happen. The agreement is popular because it allows people to test drive a home without making a big investment within a short amount of time. Of course, lease purchases have drawbacks, as in any home-buying contract.

Try our sample lease to purchase agreement and get closer to your dream property
Also called lease-to-own contracts, lease options, or lease purchase contracts, lease purchase agreements are often mistaken with the term “lease agreement.” This agreement allows a buyer to occupy the house for sale for a period of time until the sale is completed. The arrangement may assist both parties in addressing their goals and needs for transactions and their particular situation.
A lease purchase agreement usually combines two separate agreements: one on the lease agreement and one on the sale of a lease. Contracts may have clauses in the contracts where the clauses are mutually exclusive. This means a default of any of the provisions of your purchase contract will cause the contract to be broken automatically.

What You Should Know About Lease Purchase Agreements

Lease purchase agreements work by using rent-to-own principles that are structured accordingly. Rent-to-own means the purchaser rents the property for later purchase and progresses to ownership. In most cases, rent-to-own buildings are more rentable than the fair market value. The additional portion is used for a downpayment on the property.

A lease purchase is composed of two distinct contracts – usually the kind of agreement that includes what has often been called cross-default clauses – where a breach of any of these agreements results in an automatic breach of the other agreements. Typically, as the tenant-buyer has agreed to purchase the property at the end of the lease as part of a lease purchase, the leasing will usually require the tenant-buyer to pay maintenance expenses which is generally the obligation of the landlords.

Try this free lease purchase contract from Fill and take the guesswork out of purchasing a property from your landlord. The template is straightforward and easy to use; just fill out the blanks with specific information about the property, lease terms, purchase price, and more. Make sure to review the terms and conditions with a real estate lawyer before finalizing any contract. Happy house hunting!

Typical Contents of a Lease Purchase Contract

Lease purchase contracts are often advantageous for buyers and sellers because it allows for more flexible terms and options in the buying process. As with any contract, it is important to carefully review all terms before signing.

Some important things to consider including in your lease purchase agreement are:

  • Term of option
  • Exclusivity of option
  • Notice required to exercise option to purchase
  • Option consideration

Purchase price

When it comes to the purchase price in a lease-purchase agreement, it is important to consider a few things. First, you’ll want to make sure that the price is fair and reasonable for both parties involved. Additionally, you’ll want to think about whether or not the price is fixed. Lastly, you’ll want to include any applicable taxes or other associated costs in the price as well.

Down payment

The down payment, similar to the purchase price, should be fair and reasonable for both parties involved. It is also important to specify whether the down payment is refundable or non-refundable in case of default on the agreement.

Rent-to-own lease agreement

A rent-to-own agreement is a standard rent contract and has the option for tenants to buy the property. These arrangements are common among homeowners seeking to collect leased properties and sell them to the tenant for an agreed price. Financing can be provided by the property owner or through traditional lenders, depending on their mortgage qualifications.

Default terms

It is important to include a default lease term in your lease purchase agreement, specifying what happens in the event that either party fails to fulfill their obligations under the contract within the lease period. This can include a breach of payment or failure to complete the purchase by a specified date.

FAQ About This Sample Lease Purchase Agreement

A lease-to-purchase agreement enables property owners to buy hard-to-sell homes by locking in buyers while securing a monthly payment. On the other hand, a residential lease option agreement also allows tenants to secure loans with longer waiting periods or when they are trying to save money for the downpayment.
The biggest disadvantage to renting to own is the amount you rent and other non-refundable charges if you do not buy it. Some buyers might use renters in order to make the home unappealing or hard for buyers to afford.
Lease options operate similarly to lease purchases except that they consist of separate agreements that allow the occupant to finalize the acquisition of the property. Lease purchases, on the other hand, are more binding and often require specific terms to be met before ownership is transferred.
Lease purchase funding is one of the most effective and efficient means by which a local government acquires a piece of land and subsequently purchases its ownership of property.

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