What is Lease to Own Agreement Drafting?
A lease to own agreement is a contract that describes a blended arrangement: that of a rental lease with the option to buy the asset in the future. So, it starts with a lease and ends in property ownership.
To draft a lease to own agreement, you should pay attention to specific aspects of the arrangement to protect your interests and avoid disputes.
Read the rest of this article for key terms to include in the agreement, how to draft it, and how hiring a qualified lawyer will assist you with the agreement drafting process.
What are Key Terms in a Lease to Own Agreement?
Some of the most common terms that should be in a lease to own agreement include the following:
- Purchase price. This should be a formula-based or upfront amount.
- Option fee. This is usually calculated as a percentage of the property value and it serves to secure the purchase rights. It takes the form of a non-refundable upfront payment.
- Maintenance. Property upkeep must be properly assigned, which is usually the tenant’s responsibility.
- Option deadline. The agreement must clearly state the date when the right to buy can be exercised.
- Insurance. The owner usually has to keep structural insurance as long as they’re listed on the title.
What are Tips for Drafting a Lease to Own Agreement?
To protect both parties involved in the lease to own agreement, make sure that you consider the following information.
Check State Laws
Since state laws can vary quite a bit regarding requirements for your agreement, you should understand them before you sit down to draft your contract. A lawyer can help you with checking all the laws and ensuring you don’t accidentally violate them.
Outline the Lease Usage Terms
Provide comprehensive details about the property use. To ensure you don’t miss any important information, consider two important things: how the property is allowed to be used and how the parties should be responsible for their use of the property, such as in terms of maintenance, during the lease period.
Specify the Option Period
You want to specify exact deadlines for exercising the option. Specify how the closing process will work. For example, there must be clarity about how much written notice is given by the tenant with their intent to purchase.
Consider Financing
If the tenant needs to get a mortgage to finance the property, you want to clarify what occurs if the financing is denied. For example, the buyer will have to give written notice that their financing has been denied as this makes it official.
Include Disclosures
It’s required to include disclosures in a lease to own agreement, such as regarding the landlord listing all known and hidden defects. By having clarity and transparency, you’ll minimize your risk of disputes.
Do You Need to Hire a Lawyer to Draft a Lease to Own Agreement?
It’s advisable to hire a qualified lawyer to draft your lease to own agreement, especially because these can be more complicated than regular leases. A lawyer can help you in various ways during the agreement drafting process, such as by:
- Checking that the rental agreement and real estate purchase are in sync to prevent conflicting terms or obligations.
- Customizing your agreement to your specific transaction.
- Aligning all the agreement terms with the relevant state laws and legal requirements.
- Defining the purchase option. A lawyer will consider if the tenant has a right to purchase, when the option expires, and how the option must be exercised.
- Preventing ambiguity about any aspect of the process. They’ll also provide legal advice to ensure you understand every term before signing the agreement.
- Addressing financing. A lawyer will include provisions to protect you, such as specifying if a mortgage is required and what happens if financing is denied.
- Considering what happens if the property changes. They’ll outline what party is responsible for major repairs and improvements.
- Negotiating with the other party. If you need to discuss terms of the agreement before putting them in writing, a lawyer can negotiate them with the other party to have a mutually-favorable final contract.
- Reviewing the agreement if you’ve already drafted it. This will give you peace of mind that the contract doesn’t contain any hidden red flags or risks.
Where to Find a Lawyer to Draft Your Lease to Own Agreement
If you’re looking for a lawyer to draft your lease to own agreement, consider using an online legal platform. This makes it easier to connect with a reputable and experienced lawyer from the comfort of your home.
ContractsCounsel is one of the largest online legal marketplaces that connects you to a curated network of lawyers who have been vetted on the platform. To request that a lawyer on the platform drafts your lease to own agreement, here are the easy steps to follow:
- Go to the ContractsCounsel marketplace.
- Select ‘One-time project’ and ‘Create or update contract.’ If you need a lawyer to review your agreement instead, you’ll select ‘Contract review.’
- Post your project, which is free.
- Include details of what you need so you’ll match with a suitable lawyer.
- Wait for bids. You’ll receive bids from lawyers on the platform who are ready to help you.
- Review the lawyer data. On the platform, you’ll have access to information about the lawyers, such as their location, years of experience, expertise, credentials, and client ratings for projects completed on the platform.
- Select a lawyer and hire them to draft a lease to own agreement for a flat fee.
