How to Write a Residential Lease Purchase Agreement
Writing a residential lease purchase (or rent-to-own) agreement is a type of contract that allows renters to eventually buy and secure a mortgage on a home. This type of lease agreement benefits buyers who are saving for a down payment, trying to improve their credit scores or unsure about their job outlook. It's important to have a written contract between landlord (seller) and tenant (buyer) to avoid any serious legal problems.
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Instructions
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Write two agreements. Write the first agreement to cover the lease/rental of the home. The second contract should be an option to switch the lease into a purchase agreement using monthly rent as a down payment.
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Include fair market value for the home in the beginning of your agreement. This ensures that both parties are aware of the value of the property and the costs involved to purchase the home. Contact your mortgage lender to schedule an appointment with an appraiser to find out the value of your property.
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Use the proper terminology when writing a residential lease-to-own agreement. Use the terms "landlord" and "tenant" when referring to yourself and the renter. Include the full address of the home.
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State the exact dates that each contract begins and ends. When the agreement expires, a new contract must be signed by the landlord and tenant. If the tenant wants a longer lease, include a renewable option for that amount of time. If the purchase option is not in use during first occupancy of the home, the tenant may choose to use the option once the current leasing period has expired.
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Decide if you require a down payment to lease the home. A non-refundable down payment can be used to repair the home in the event the tenant does not purchase it. Also, a down payment for a residential lease may be used as a credit toward the final purchase price of the home at closing. Discuss with a real estate agent about your options.
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Determine monthly rent and when it's due each month. State the fees and procedures for late rent in your agreement. This step is important in a rent-to-own agreement because a percentage of the monthly rent is applied toward purchasing the home. The percentage of rent can range from 40 to 100 percent, according to efinancedirctory.com.
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Write which additional monthly costs and fees are to be paid by the tenant. This includes insurance, water, trash, electricity, gas and homeowner's association fees.
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Indicate if the tenant can renovate the home under the lease purchase agreement. This may include painting, wallpaper and new carpet. In addition, set-up who is responsible for maintenance of the home, such as plumbing and yard up-keep.
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Maintain the right as the landlord to enter the property and to evict the tenant based on conditions set forth in the lease agreement. Check your state laws when writing this section of the agreement.
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Choose the title company for which the settlement/closing will be held to transfer the home over to the tenant. Notify the tenant in writing of the location, date and time of the closing. In most states, as the landlord, you are only financially responsible for pro-rated taxes on the home as calculated at the time of closing.
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Tips & Warnings
Hire a lawyer to draft and review the lease-to-purchase contract, so that all legal issues are covered.
Document everything you do as a landlord in writing. Keep copies and records of everything. If a legal issue arises later on, you'll have a paper trail of all the maintenance and repairs for which you were responsible.
