At Landlord Station, we understand that a lease purchase agreement may sound like an appealing option to an anxious seller in a rough market or an owner/landlord who wants to get out of the business. While there are benefits to this type of agreement, as with any contract, there are risks as well. Before you sign that lease purchase agreement form, it is important that you ask yourself a few questions. Please note that what follows is not legal advice. If you are seeking legal advice on a lease to purchase agreement, please consult a licensed attorney.
The first question you should know the answer to is what exactly is a lease purchase agreement? More commonly known as a rent-to-own contract, this agreement comes in two types. The first, and least, common type is a lease to purchase agreement, wherein the buyer promises to buy the home at the end of the lease term. The second, and most common type, is a lease to purchase option agreement. In the second type of agreement, the lessee rents the home and pays a premium for the exclusive option to buy at the end of the lease term. The option to buy usually occurs around three years.
The next question to consider is how this type of agreement affects you as landlord. The biggest risk to you in a lease purchase agreement is the renter not taking the option to buy the home at the end of the contract. You can always extend the option to buy past the deadline, but the lessee may not be interested or just simply can't afford it. Other than that, a lease to purchase agreement basically proceeds like a normal lease with you and your tenant bound by each other's rights and responsibilities for the full term of the agreement.
The last question you should ask yourself before signing a lease to purchase option agreement is what exactly does the contract say, especially about the obligations of each party? In a traditional landlordship, the law requires particular things from you, like providing certain services and responding to reasonable requests for repairs. However, your tenants may feel empowered by their investment in the exclusive option to buy and want to take care of the house themselves. If this is the case, then it is your responsibility to not only make sure that this agreement is written out in detail on the lease purchase agreement form, but also that the shifted obligations are legal.
In fact, when you sign the lease purchase agreement form, you should be signing a document that has every detail of every agreement made within the rent-to-own contract written out. This includes the rent amount, due date and time; how much of the rent is applied to the purchase price; the cost of the non-refundable purchase option fee; and the length of the option term. Remember, the lease purchase agreement form is a written, legally-binding contract between you and your tenant. It is what will protect you, and your interests as landlord, in court should something happen. The more information you have specifically spelled out in the agreement form, the better.
Once you know that both your, and your tenant's rights, obligations, and expectations are clearly written out in your lease purchase agreement form, make sure to have a qualified, experienced lawyer review it for any issues. Remember that Landlord Station is not authorized to give you legal advice about this subject and only provides this information on a general, educational basis. If your contract proves to be legally sound and to the agreement of all involved parties, then you can sign your way into a lease that will hopefully result in a sale. Again, for more detail information about this subject, please consult an attorney. Otherwise, we at LandlordStation.com sincerely hope this lease purchase agreement article has been helpful to you.
© Copyright 2015 LandlordStation LLC