What is Lease Purchase Agreement Drafting?
A lease purchase agreement is a legal contract between a landlord and a tenant that provides a property lease for a certain duration with the obligation to purchase the property after contract termination. This means the tenant is committed to buying the property in future.
If you need to draft a lease purchase agreement, read the rest of this article to explore what key terms to include so that it’s valid, and how a lawyer has the expertise to help you with a professional drafting to meet your requirements.
What Key Terms Should You Include in a Lease Purchase Agreement?
A lease purchase agreement usually contains essential terms such as the following:
- Purchase price. This is the amount of money the tenant pays for the property.
- Rent credits. This is the percentage of monthly rent that’s put towards the purchase price or down payment.
- Term. It should be clear when the rental period will begin and end.
- Maintenance and repairs. There must be clarity about which party will handle upkeep and repairs on the property.
- Default and remedies. If lease terms aren’t met, the agreement should specify how to handle the situation.
- Dispute resolution. Should parties have conflict, the agreement should state how they can resolve it, such as if they’ll go to mediation or arbitration.
How Do You Draft a Lease Purchase Agreement?
When drafting a lease purchase agreement, you should include details to protect both parties, such as the following.
Establish the Purchase Price
When setting the purchase price for the property, you can approach this in various ways, such as by setting it to the property’s market value at the beginning of the lease term with annual increases. Another option is to determine the price via an appraisal at the end of the lease, which helps to fairly assess the property’s current market value.
Set the Option Fee
It’s common for option fees, or down payments, to be around 2-5 percent of the property purchase price. Although this fee is non-refundable if the buyer doesn’t purchase the property, it’s used to credit the purchase price at closing.
Specify the Credits
Your agreement must specify how much of the monthly rent will go to the down payment. It’s important to document this credit so that there’s no confusion about the amount.
Also, when specifying the monthly payments that contribute to the down payment, make sure you list the exact amounts instead of using percentages that could result in misinterpretations.
Explain Maintenance and Repair Duties
List all the maintenance and repair work that parties agree to cover. It’s common for sellers to handle major system issues, for example.
When outlining parties’ upkeep and repair responsibilities, you should also specify which party will cover things like insurance, utilities, and property taxes.
Be Clear about Default and Remedies
When drafting a lease purchase agreement, provide clarity about what constitutes default and how it can be dealt with. For example, the tenant might lose their option fee if they default. By comparison, the seller might have to fulfill the duty of returning the money.
Get a Legal Review
To give you peace of mind that your lease purchase agreement is legal and clear for both parties to understand, you should consider getting a review of your contract by a qualified lawyer. They'll make sure that you don’t sign an agreement that exposes you to hidden risks.
Should You Hire a Lawyer to Draft a Lease Purchase Agreement?
Getting your lease purchase agreement drafted by a qualified lawyer can help you ensure it has all the accurate and precise terms to govern the sale. Here is how a lawyer will assist you during the agreement-drafting process.
- They’ll properly define both parties’ rights and duties so that they can align their expectations.
- They’ll clarify the purchase terms to prevent ambiguity that can result in disputes.
- They’ll include default clauses that mention notice requirements, cure periods, termination rights, and refunds.
- They’ll explain all the potential risks you might face, and include provisions in the agreement to address them.
- They’ll comply with all state and local laws so that the agreement is enforceable.
- They’ll draft the lease purchase agreement so that it’s clear and easy to understand, preventing conflict between parties.
- They’ll save you money. The money spent on hiring a lawyer to draft your agreement will be much less than the cost of litigation.
Where Can You Find a Lawyer for Lease Purchase Agreement Drafting?
Finding a reputable or experienced lawyer can sometimes be stressful. If you need to hire a lawyer to draft your lease purchase agreement, you should use an online legal platform that provides transparency about the lawyers’ expertise and experience.
ContractsCounsel is one of the largest online legal marketplaces that gives you access to a network of vetted lawyers.
If you need to hire a lawyer to draft your lease purchase agreement, the process is easy. Here are the steps to follow from the comfort of your home:
- Go to the ContractsCounsel marketplace.
- Post your project for free. Try to include a few details to help you find the most suitable lawyer, such as why you require a lease purchase agreement or the parties involved.
- Receive multiple bids from lawyers directly on the platform who have the experience to help you draft your contract.
- Review the lawyers’ profiles. Go through the platform’s extensive lawyer data, such as the lawyers’ location, client ratings for previous projects, expertise, and credentials.
- Connect with a lawyer and hire them to draft your lease purchase agreement for a flat fee.
