A lease purchase agreement combines a right of first option to purchase and a rental agreement into one.
These types of agreements are frequently used in the rent-to-own community because it offers the benefits of renting and provides renters the option to purchase at a predetermined price.
The agreement defines how long the tenant buyer has to exercise the option to purchase the property at the predetermined sale price.
In order to make the contract legally binding, the tenant buyer must pay a non-refundable option fee to the seller.
The payment of the option fee gives the tenant buyer the exclusive right to buy the property for the predetermined price on a specific date.
If the tenant buyer is unable to secure a mortgage by the time the lease expires, they forfeit their entire option fee.