Option To Lease
US Legal Forms has options to lease real estate for every State, so no matter where you are, we have the form for you. Easily modified to fit any application, simply select your State and choose the option to lease real estate that fits your needs.
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Option to Lease - Does it Make Sense to Use One?
An option to lease is an option agreement in which the tenant pays option money to the landlord for the right to lease rental property or extend a lease in the future. It may be used to give someone the exclusive right to lease property, or to keep monthly rent locked in at a going market rent or interest rate in a changing housing market.
For tenants, an option to lease is most beneficial when the rental rates are expected to increase in the future. By creating an option to lease, the tenant may be able to lock in the current fair market rent or interest rates. It may also be a preliminary step used before the parties agree to a purchase of real estate, and may be created without the need of a real estate agent. It is recommended that the tenant remain aware of what the landlord is doing with the property, and a clause may be included preventing the landlord from taking out loans on the property during the option or lease period.
Advantages of an option to lease for sellers include the ability to create a cash flow from rental homes that are hard to sell. The option price often allows sellers to collect a higher rent than standard rent market value. If he tenant decides not to exercise the option, the landlord gets to keep the price paid for the option. Also, by giving the tenant the option to rent the property for a longer period, and possibly purchase the property at the end of the lease term, there is incentive for the tenant to take better care of the rental property.
Option to Lease, Lease Option or Lease Purchase Agreements
A strict option to lease is an option contract, in which an option price is paid in exchange for the right to decide to exercise the option during the specified option period. The option allows the right to lease the property, or extend a current lease, and is not an option to buy the property. However, lease option has become a broad term that encompasses other types of lease options used in houses for rent and other rental property.
The term is sometimes used to refer to leases that contain an option to purchase, also called lease purchase agreements, rent to own, lease to own, or option to purchase agreements. Those types of lease option agreements do grant the right to purchase the property, and are often used in homes for sale by owner as a method of seller financing when the buyers can't qualify for a mortgage or can't get a loan on their own. In lease purchase agreements or rent to own situations, the monthly lease payment during the term of the lease may be credited towards the down payment toward the purchase price for the property.
Deed of Trust FAQs
What is an option to lease?
Option to lease agreements allow a tenant to pay option money to the landlord for the right to lease rental property or extend a lease currently in force. An option to lease may be used to give someone the exclusive right to lease property, or to fix monthly rent at a current market rent in a changing interest rate and housing market.
What are the advantages of option to lease contracts?
An option agreement can benefit tenants when market rent is expected to rise in the future. By agreeing in advance to the lease payment, the tenant may be able to lock a certain fair market rent or interest rates during favorable conditions. It may be a preliminary agreement before a decision to agree to a purchase of the property is made, and there is no need for involvement of a real estate agent.
An option to lease is a way for sellers to create a cash flow from rental property that has been on the market a long time. Sellers can often collect a higher rent by including an option agreement in the lease. The landlord keeps the money paid for the option, regardless of whether or not the tenant chooses to exercise the option. Because the tenant has a possibility of a longer term investment in the property it creates an incentive for the tenant to treat the rental property with a higher standard of care.
How is an option to lease different from a lease option or lease purchase agreement?
A traditional option to lease is an option contract, allowing an option price to be paid in exchange for the right to lease property by exercising the option during the stated option term. The option grants the right to lease the property, or renew or prolong a current lease, and is not an option for a right to purchase the property. Recently, lease option has developed a broad meaning that includes other types of lease options used in homes for rent and other leased property.
Is an option to lease known by other form names?
The term option to lease is sometimes used to refer to leases that contain an option to purchase, also called lease purchase agreements, rent to own, lease to own, or option to purchase agreements. Those types of lease option agreements do grant the right to buy the property, and are often used in property for sale by owner as a method of seller financing when the buyers can't qualify for a mortgage or can't get a loan on their own. In a lease purchase or rent to own situation, the monthly lease payment during the term of the lease may be applied towards the down payment on the purchase price for the rental homes for lease.