A lease purchase contract is a shortened name for lease with option to purchase contract. It is a form of real estate purchase which combines elements of a traditional rental agreement with an exclusive option of right of first refusal to later purchase the home.
These contracts are commonly used where a buyer wants to purchase a home, but due to credit issues would not qualify for a conventional mortgage and does not wish to, or would not qualify, for FHA or VA financing.
Under the typical terms, the tenant/buyer chooses the home and seeks a landlord/seller to serve as an investor. The tenant/buyer then agree to a lease period, during or after which the tenant/buyer has the exclusive right to purchase the home at a previously agreed-upon price. The tenant/buyer pays to the landlord/seller a non-refundable option deposit that is applied to the purchase price of the home. The tenant/buyer then pays to the landlord/seller a sum that is typical to the rental amount usually on a monthly basis, of which a portion of that monthly payment may or may not be applied to the purchase price of the home, but which normally covers the mortgage amount owed by the landlord/seller.
Should the tenant/buyer not wish or be unable to purchase the house, the tenant and landlord can agree to extend the option period, convert the lease purchase contract into a traditional rental agreement, or end the contract with the tenant moving out and the landlord seeking other renters or buyers.
Lease purchase and lease option could be considered different where a lease purchase uses a purchase agreement and a lease option may not and an option is a unilateral contract and a purchase agreement is typically a bilateral contract.
Famous quotes containing the words lease, purchase and/or contract:
“Shall I compare thee to a summer’s day?
Thou art more lovely and more temperate.
Rough winds do shake the darling buds of May,
And summer’s lease hath all too short a date.”
—William Shakespeare (1564–1616)
“O, let us have him, for his silver hairs
Will purchase us a good opinion,
And buy men’s voices to commend our deeds.”
—William Shakespeare (1564–1616)
“Smoking ... is downright dangerous. Most people who smoke will eventually contract a fatal disease and die. But they don’t brag about it, do they? Most people who ski, play professional football or drive race cars, will not die—at least not in the act—and yet they are the ones with the glamorous images, the expensive equipment and the mythic proportions. Why this should be I cannot say, unless it is simply that the average American does not know a daredevil when he sees one.”
—Fran Lebowitz (b. 1950)