What does a lease purchase agreement cost? This is a question often asked by property owners who are considering a rent-to-own agreement with a tenant. Let’s explore this question and review some general information about lease purchase agreements and how they work.
How Much Does a Lease Purchase Agreement Cost?
A lease purchase agreement, sometimes called a rent-to-own agreement, is a legally binding contract between a landlord and a tenant in which the tenant agrees to purchase the property they are renting.
The landlord and tenant will agree on a purchase price of the home to be paid at the end of the lease term. Throughout the lease term, a portion of the rent will go towards a down payment on the property. This usually results in a slightly higher monthly rent than that area's average rent.
Many lease purchase agreements require the tenant to pay an option fee to secure their exclusive rights to purchase the property. The tenant must be confident they will be approved for a mortgage at the end of the lease. If the seller cannot finance the purchase, they will forfeit the purchase option.
Lease purchase agreements are structured very similarly to a standard lease agreement. Still, they will include several extra clauses about the purchase of the property. Tenants who agree to a lease purchase contract are often responsible for paying:
- Maintenance costs
- Property taxes
Lease purchase agreements are complex legal contracts that cover many details about renting and purchasing a home. Therefore, it is highly recommended that a property owner hires an experienced real estate attorney to draft this agreement.
Real estate lawyers familiar with lease purchase agreements can draft a contract that protects a landlord and their property.
Based on ContractsCounsel’s marketplace data, the average cost of a project involving a lease purchase agreement is $886.67.
What’s Included in a Lease Purchase Agreement?
Lease purchase agreements combine two real estate contracts: a rental agreement and a contract for sale and purchase. Both documents must include all necessary terms and conditions to bind the transaction legally. Failing to include important provisions could leave the landlord or tenant open to civil lawsuits.
The rental agreement should include the following information:
- Contact information for the landlord and the tenant
- Details about the property (address, square footage, description, etc.)
- Monthly rent amount
- Cost of utilities, maintenance, taxes, and insurance and who is responsible for these expenses
- Duration of the lease
- Security deposit requirements
The contract for sale needs to include these terms and conditions:
- Purchase price
- Whether an option fee is required
- What portion of the monthly rent will go towards a down payment
- Fixtures and appliances included in the sale
- Closing and possession date
The terms of both contracts will be negotiated between the two parties. Therefore, they can easily be customized to fit the needs of both parties. Contact a real estate attorney familiar with lease purchase agreements if you are unsure what provisions your rental lease agreement needs.
Examples of Lease Purchase Agreement Projects
Lease Purchase Agreement Drafting Services
Lease purchase agreements are complicated contracts. If a critical provision is miswritten or omitted, either party could be left open to risks and liability.
To avoid mistakes and misunderstandings, many landlords hire a real estate lawyer to draft their lease purchase agreement. An experienced real estate attorney will know which clauses must be included to protect the landlord’s interests and avoid civil disputes.
Lease Purchase Agreement Review Services
It is usually the property owner’s responsibility to provide a lease purchase agreement for the real estate transaction. However, tenants should use caution because contracts tend to favor the drafter. This means that terms in the contract could unfairly benefit the property owner over the tenant.
It is recommended that a tenant hires their real estate attorney to review the lease purchase agreement before signing the contract. A tenant’s lawyer will review the agreement to ensure the terms are fair and the tenant’s interests are protected.
Lease Purchase Agreement Drafting Cost
A property owner who hires an attorney to draft a lease purchase agreement will incur legal fees. The costs can vary based on the agreement’s length, complexity, and how many custom terms need to be included in the contract.
ContractsCounsel’s marketplace data shows that the average lease purchase agreement drafting costs are $904.00 across all states.
Lease Purchase Agreement Review Cost
Suppose a tenant hires a lawyer to review a lease purchase agreement. In that case, they will be responsible for paying their legal fees. In addition, the lawyer will charge for the time it takes to review the contract and any additional time spent consulting with the client or revising the agreement.
ContractsCounsel’s marketplace data shows that the average lease purchase agreement review costs are $800.00 across all states.
How Do Lawyers Charge for Lease Purchase Agreements?
Real estate lawyers can charge their clients using different fee structures. The two most popular types of fee agreements in the real estate world are hourly and flat fee rates.
Hourly Rates for Lease Purchase Agreements
Hourly rates are the most common fee structures used by lawyers in all legal fields. Under this structure, lawyers will bill their clients for the number of hours spent on a legal project at a set hourly rate.
Lawyers benefit from an hourly rate structure because this fee agreement ensures that a lawyer is compensated for all of their time working on a legal project. On the other hand, clients may be apprehensive about hourly rates because they will not know the total cost of legal services until the project is completed.
The marketplace data for ContractsCounsel shows that the average hourly rate for a real estate lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for Lease Purchase Agreements
Flat fee rates are becoming more common for attorneys to charge their clients, especially for document drafting projects. Under a flat fee rate, the lawyer will assess the task and then quote the client a total fee for legal services.
Most lawyers require flat rate fees to be paid upfront before beginning work on the project. However, despite paying upfront, many clients prefer flat fee rates. Unlike hourly rate billing, a client knows exactly how many legal services will cost before even hiring the attorney.
A client must understand what is included in the flat fee rate. Additional legal services like meetings, negotiations, and contract revisions may not be included and could cost more.
ContractsCounsel's marketplace data shows that the average flat fee rate for a lease purchase agreement is $886.67.
Get Help with a Lease Purchase Agreement
Do you need help with a lease purchase agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from real estate lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.