Lease option is made up of two parts, lease and an option. The contract can be drafted in a single agreement or can be written as two agreements depending upon the convenience of the owner and the tenant. The lease agreement is between the owner and the tenant. The lease is often triple net lease, where the tenant is responsible to pay the tax, maintenance, insurance and repair cost for the property. The lease payment is normally higher than the rental.
The concept of lease option is easy to understand. This option can be used by landlords and tenants to benefit immensely. The option can be called a right and not a duty. This option can be executed within a period of time. The transaction is either purchase/sale of a property. The property needs to be purchased with a specific date mentioned in the contract. The option can be based on strike price or exercise price. Strike price is termed as a price that the transaction was agreed upon. You can abide by the strike price or simply walk off from the deal. The expiry date is mentioned in the contract, once the date is over, the contract is invalid. The date can be negotiated by both the parties. The seller can sell the property at the strike price if the option is exercised.
In case the deal is out, the seller gets the option premium. The premium is the amount the buyer makes to the seller to hold the option. The premium amount is again decided by both the parties. The lower the premium the better for the buyer, because even if the buyer walks out in the middle, the lesser he looses. On the whole, the lease is an agreement that the tenant enters with the landlord to take possession of the property for a stipulated period of time. The lease agreement is legal and once violated leads to legal complications. If this lease is combined with an option to buy it is called Lease/option. This option can help settle your financial crisis. A solicitor who is experienced in handling lease can help devise the right agreement to satisfy both the parties.
People prefer lease with option to buy because the banking guidelines are becoming stricter day by day. Acquiring a loan has become difficult with banks making new amendments in their lending rules. Many are unable to arrange for a loan deposits and this has left them with only one option lease. Likewise a person with poor credit ratings finds it difficult to get through the loan process. Self employed people and people with new jobs often find it difficult to buy a house, due to the banking regulations. Their financial report will be very poor leading to rejection of their loan application. The best way to realize their dreams of owning a house is through lease option.