The lease-purchase business agreement creates a relationship between a landlord and tenant, whereby the tenant typically rents the property for a specific duration of time, and subsequently, purchases the property outright. This situation is advantageous to both parties. The tenant, often a first time homebuyer, is able to build a cost history that is foremost to prospective lenders while buying himself/herself added time to save money for the down cost and end costs. The landlord is able to acquire a buyer without having to shop the property through a real estate agent, thereby retaining more of the behalf on the transaction.
It is foremost for both parties to memorialize the lease-purchase transaction in writing so that all of the terms are clearly established. Below, you will find some of the key terms as well as sample language that are often used in a lease-purchase agreement. Remember, that you should not rely on the language below as legal advice. This is for demonstration purposes only. All the time consult a real estate attorney before entering into a real estate transaction.
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The Leasing Provisions of the Lease-Purchase Agreement:
1. Lease- The lease-purchase business agreement needs to state first and foremost the leasing component of the transaction. Example: "Seller hereby demises and leases to Purchaser and Purchaser hereby takes and rents from distributor that inevitable real property placed in ____________County, ____________, being more particularly described on Exhibit "A" attached hereto and incorporated herein by reference."
2. Term- As in any lease, the start date and end date of the lease must be specified. Example: "The preliminary term of the Lease shall begin on the _____day of _______, 2008 and shall cease on the _____day of _______ 2008".
3. Rent- The number should be clearly set forth as well as the due date for rent each month. Example: while the term of the Lease, Purchaser shall pay unto distributor the sum of ______________($_______________) per month as rent for the Property. The monthly rental shall be due on the _______ day of the month and if not paid by the ______ day, there shall be a late payment of $_________ due for such month".
Of course, as in any lease, you want to consist of provisions dealing with utilities, taxes, permissible/non permissible alterations to the property, assignment and subletting, nuisances, entry and inspection by landlord, and any principal disclosures such as lead-based paint and mold.
The buy Provisions of the Lease-Purchase Agreement:
1. Agreement to buy Real Estate - Lease-Purchase Agreements can be mandatory or non-mandatory. The language should reflect either the tenant must buy the property at the end of the lease-term, and what penalties the tenant will face if he/she defaults and fails to close the transaction. Example of mandatory buy language: "Seller agrees to sell and Purchaser agrees to buy on the terms and conditions set forth herein that inevitable of real property placed in ________ County, _______________________, being more particularly described on Exhibit "A" attached hereto and incorporated herein by reference, together with all improvements now situated thereon. The end Date of the buy shall be on or before _________________, 2008. The parties respond that time is of the essence in completing and end the buy transaction".
2. Earnest Money- As in any residential buy agreement, the lease-purchase business agreement should consist of language that requires an earnest money deposit from the tenant. A landlord may acquire more than just the earnest money deposit as damages if the business agreement is worded to provide for added damages. Example: "In conjunction with the doing of this Agreement, Purchaser has delivered to distributor earnest money in the number of _____________ ($___________) to acquire and warrant Purchaser's duties and obligations hereunder. In the event Purchaser shall default in any of its duties or obligations hereunder, distributor shall be entitled to said earnest money as liquidated damages. Liquidated damages are not deemed full pleasure of all claims for damages and injuries, and distributor may profess any and all actions permitted under the laws of the State of __________, including, but not minute to, injunctions, specific doing and actions for damages."
3. Purchase Price- The buy price must be set forth in the agreement. Also, the language typically states that the tenant's lease payments are credited toward the buy price of the property. Example: "Purchaser agrees to pay distributor and distributor agrees to accept as total notice for the buy and sale of said property the total sum of ________________($_____________), plus interest at the rate of ______ percent (_______%) per annum from and after the date of this business agreement (the "Purchase Price"). Purchaser shall be entitled to deduct from the buy Price the earnest money paid pursuant to Section ______ hereof and all rents paid pursuant to Section ______ hereof, with all such amounts to be applied first to accrued interest and then to principal."
As in most agreements of sale, you also want to consist of provisions that address title, end costs, taxes, inspection, default, condemnation, and disclosures.
Lease - buy Agreements For Residential asset
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