What Is a Rent to Own Agreement? 

A Rent to Own Agreement is a formal contract negotiated and signed by a real estate owner and a tenant to let the latter use the house, apartment, or office space in question and later offer to purchase the real property. 

Alternate Names: 

  • Lease to Own Agreement; 
  • Rent to Own Lease Agreement. 
  • Lease Purchase Agreement. 

Once the lease is over, the tenant will buy the residence or commercial property from the landlord - whether you were unable to afford a real estate purchase when signing the lease or you wanted to take some time before making this important decision, this agreement allows the tenant to stay in their home or office even after the lease expires. 

How to Structure a Lease Purchase Agreement? 

Follow these steps to draft a Lease to Own Agreement:

  1. Determine the nature of the contract right away - if the tenant will not be obliged to purchase the property described in writing, you need to title the document "Lease Option Agreement" - it will be the right for the tenant to exercise if they choose to. Otherwise, insert the title "Lease Purchase Agreement" to demonstrate the tenant's obligation to buy real estate. 
  2. Write down the names and addresses of the parties - the landlord and the tenant.
  3. Specify the location of the property to be rented. List all the appliances and furniture the tenant will be able to use during the lease term. 
  4. Describe the provisions of the lease - typically, the tenant acquires the right to use the real property for commercial or residential purposes only while taking care of the real estate entrusted to them. The landlord will make regular lease payments from the tenant - every two weeks or every month - and must let the tenant and people who live or work with him use the real estate undisturbed. Determine which party takes care of the routine and major repairs. 
  5. State the duration of the lease - traditionally, it does not exceed two or three years. 
  6. Confirm the tenant will exercise the right to buy real property identified in writing after the lease is expired or terminated by mutual consent. Since the market is unpredictable and the parties might not know the price of the real property in two or three years after the documents are signed, it is recommended to agree on the prospective sale and purchase of the real estate at the market price relevant once the lease ends.
  7. Consider the possibility the tenant will not be able to buy the real estate - in this case, both parties should agree to convert the contract into a generic lease or the tenant can leave the real estate to allow the owner to find another willing buyer.
  8. Certify you have read and understood all the terms of the agreement, sign and date the contract. You may obtain a notary seal to protect the interests of the property owner and tenant if you like; however, notarization is not obligatory.

Still looking for a particular template? Take a look at the related templates and forms below:

Documents

2

"Lease Option Agreement Template"

Rate (4.7 / 5) 31 votes
Size: 97 KB
5 pages

When signed, a lease option provides the tenant the option to purchase the rented property during or at the end of the rental period.

"Lease to Own Agreement Template"

Rate (4.6 / 5) 20 votes
Size: 110 KB
7 pages

This agreement requires the tenant to purchase the property that they are renting at the end of the lease term.