A lease-to-purchase agreement is used between a landlord and tenant when the tenant wishes to purchase the property at the end of the lease term. These agreements include everything you’ll find in a regular lease agreement, with the addition of specific clauses governing the option to purchase the property. Using a lease-to-purchase agreement template helps you navigate the intricacies of this type of agreement.
This Lease to Purchase Agreement (referred to as “Lease”) is made effective as of [Document.CreatedDate] (referred to as “Effective Date”) by and between [Landlord.FirstName] [Landlord.LastName] (referred to as “Landlord”) and [Tenant.FirstName] [Tenant.LastName] (referred to as “Tenant”).
This Lease-to-Purchase Agreement is subject to the terms and conditions stated below. The Landlord and Tenant (combined, referred to as “Parties”) agree as follows:
The Landlord agrees to lease the residential property located at [Property.Address] (referred to as the “Premises”) to the Tenant.
Description of Property: (Brief description of property)
The Lease term will begin on [Document.CreatedDate] and will end on [Document.ExpirationDate] .
If the Tenant fails to exercise the option to purchase by such time and date, the option will automatically terminate, and the Landlord will be entitled to retain the non-refundable considerations stated below.
The Tenant shall pay the Landlord monthly installments of $(Enter amount), payable in advance on the first (1st) day of each month.
Of this amount of $(Repeat monthly installment), $(Enter amount) will contribute to the down payment should the Tenant choose to execute the Option to Purchase.
*(the image markup has been removed in the example for ease of viewing) place for path’s a pictureThe rental amount for a residential lease-to-purchase agreement is typically more expensive. This is because you pay extra to contribute to the option to purchase. For example, if similar rentals in your area charge $1000/month, it’s not unusual for a lease-to-purchase agreement to charge $1200/month, with the $200 going towards the down payment.
Lease payments shall be made to the Landlord at:
(Enter where and how payments should be made)
Some states place a limit on the amount that can be charged as a security deposit. Check with your local laws to ensure you know what the maximum is.
The Landlord will require the Tenant to pay a one-off security deposit of $(Enter amount) for the lease of the Premises.
If the Tenant takes the Option to Purchase at the end of this Lease, the security deposit will be credited towards the purchase price of the property.
If the Tenant does not take the Option to Purchase and vacates the Premises at the end of the Lease Term, the security deposit will be returned to the Tenant within (Enter number) days, less any damages beyond normal wear and tear.
The Tenant, upon satisfactory performance of this Lease, shall have the option to purchase the residential property described herein for a purchase price of $(Enter number) , provided that the tenant timely executes the option to purchase and is not in default of the Lease agreement.
Thereafter, each of the parties shall promptly execute any and all further instructions or other documents, including a Sale Agreement, that may be reasonably required for the purchase of the residential property.
*(the image markup has been removed in the example for ease of viewing) place for path’s a pictureThe security deposit and part of the lease payment contribute towards a ‘down payment’ when the tenant chooses the option to purchase. Keep in mind that in most cases, only a small part of the rental payment, not the entire balance, contributes.
The Landlord shall credit towards the purchase price at closing the sum of $(Enter number) from the security deposit and $(Enter amount) from each monthly lease payment that the Tenant made on time.
To exercise the Option to Purchase, the Tenant must deliver to the Landlord a written notice of the Tenant’s intent to purchase not less than (Enter number) days before the expiration of the Lease Term.
In addition, the written notice must specify a valid closing date. The closing date must occur before the original termination date of the Lease Agreement.