A lease-with-an-option-to-buy contract states that the person leasing a house has the choice to purchase the home for a particular price by a particular date. These agreements are commonly entered into by renters with credit issues who need time to resolve those issues before securing a mortgage. Lease-to-own contracts will also be attractive to landlords who would prefer the assurance that they could have a buyer to the house. Because this is essentially a rental contract before the right-to-purchase choice is exercised, the contract should cover all of the basics of the landlord/tenant arrangement.
Specify the address of this property. Explain whether it’s a single-family home, townhouse, duplex, tri-plex, apartment or mobile home.
Detail the rental payment and fees. State the amount of rent to be paid, when it’s due, the way it should be paid and penalties for late payments or inadequate funds.
Set forth the amount of the security deposit and the terms for the return of the deposit.
Include a covenant of quiet enjoyment, describing that the tenant could peaceably and quietly enjoy the house by fulfilling her obligations.
Stipulate the use of premises. Summarize the way the premises may be utilized and how many occupants may reside there.
Detail the tenant's rights in regard to assignment and subletting. Whether there are any, specify the terms under which the tenant may assign or sublet the property.
Indicate what happens in the event of default; include both financial and physical remedies.
Summarize the policy on possession of property, utilities, pets and alterations. Explain the date when the tenant may take possession of the property, who is responsible for utilities, if pets are permitted and any damages or alterations to the property is going to be treated.
Set forth any prerequisites for the tenant to get rental insurance.
Figuring out what happens in the event of jealousy and absences: Explain when the property may be considered abandoned or what happens in the event of extended absences by the tenant.
Itemize the option-to-purchase section of the arrangement. Detail exactly what the sales price is going to be, how much the tenant will pay the landlord as a substitute consideration, what proportion of the monthly rental payment will function as a rental credit toward the last price of the house, and also what happens to the alternative consideration and leasing credits if the tenant does not exercise the right to purchase.