A rent-to-own agreement is a legal real estate arrangement a landlord and tenant enter into, granting the latter the right to lease a rental property and buy it after his or her lease expires.
A Rent-to-Own Agreement is a real estate contract between a landlord and tenant, allowing the latter the ability to buy the property he or she is renting after his or her lease with the landlord expires. In general, the parties agree to a term lease, perhaps one to several years. After the lease or rental term, an option to purchase is granted to the tenant, giving him or her the right to buy the rental property within a specified period of time. This right is given in exchange for a fee.
During the lease term, the tenant remains as a regular tenant obliged to pay monthly rent. The title of the property remains with the landlord until the tenant decides to use his or her option to purchase the property. However, in general, a tenant who does not exercise his or her right to buy does not have the benefit of refunding the option fee. A simple definition for the option fee is that it is non-refundable money that the tenant pays for the right or option to buy the property within a time period.
Also called lease-to-own agreement or lease-options, or lease with the option to purchase agreement, a rent-to-own agreement is a traditional buying arrangement between two parties. While this method has several financial benefits to both landlords and tenants, it must cover all important terms and conditions to avoid disputes and disagreements in the future between the involved parties. In addition, before entering into this type of agreement, it is advantageous and smart to seek legal counsel first. Consult with a licensed attorney expert in the field of real estate before agreeing to a rent-to-own arrangement.
Using a rent-to-own agreement could be a beneficial move for a tenant who aspires to own a house without the exhausting process of applying for a mortgage and the headache that paying for it causes. In addition, this arrangement allows a tenant to invest and build equity in a house while opening the option of eventually refusing to purchase. On the other hand, a landlord may benefit from this arrangement if he or she is having difficulty selling his or her rental property. The option period grants a landlord a long-term tenant and the luxury to not have to deal with the expense and cost of the upkeep of the rental property.
From crucial information, such as the details of both the landlord and tenant and the property to payment terms and conditions, a rent-to-own agreement should clearly state all the necessary terms to avoid future conflicts and disputes.
Use the guide below to fill out PDFRun’s rent-to-own agreement template correctly.
First, provide the date and location the agreement was completed and executed. Then, provide the full legal names of the renter and buyer.
For the Payment Terms, it lists important conditions including the agreed payment every month until the completion of the total amount due for the property, the rental period, late payment fees, and terms in case of failure to pay by the tenant.
For Property Information, provide the complete address of the rental property, its type, and inclusion, such as the number of bedrooms, bathrooms, and its measurement or size in square feet.
Lastly, both the landlord and tenant should provide their full legal names, signatures, and the date they signed to validate the rent-to-own agreement.