Rent to Own is becoming more popular in Australia for those who have difficulties in fulfilling their dreams of home ownership. ‘Rent to Own’ is an alternative way to own a house by renting the house through a contract with the seller as a temporary arrangement for a short period of time usually one to three years.  During this time the renter can repair his credit to qualify for a home loan or save up the amount towards the down payment of the house.  Many people do not have enough savings to meet the down payment requirements of a home mortgage and many others do not qualify for conventional home loans

These obstacles are overcome by the concept of home ownership through the ‘Rent to Own’ process.  He has to enter into an agreement that is signed between the home owner and him. This agreement is known as the Lease Agreement or ‘Rent to Own’ agreement that entitles the renter to own the house during or at the end of the agreement period at an agreed price. The agreement is a legal document that can be accepted in a court of law if any dispute arises.

The Rent to Owen agreement contains the terms and conditions on which the seller and the renter enter into the contract.  A part of the rent goes towards the purchase price of the house unlike the normal rent which does not contribute towards any benefit for the renter. The rate of rent that goes towards the purchase price is mutually agreed by both parties and is mentioned clearly in the ‘Rent to Own’ document.  The renter benefits only if he decides to buy the house ultimately or else he would lose the entire payment towards the purchase price of the house.  There is an Option fee to be paid by the renter towards exercising the option to buy the house later as per the agreement. If the renter defaults with the monthly payment he may lose the rent to buy option.

The renter has the right to buy the house but it is not mandatory.  The owner of the house is bound to sell the house only to the renter with whom he has entered into the ‘Rent to Own’ contract.  The contract specifies the exact duration of the agreement and the end date within which the renter has to buy the house under the terms of the contract. When both the parties have clearly understood all the points the agreement has to be signed by all those involved in the transaction.  The agreement has to be notarized. Both parties have a copy of this document. The renter will have to keep a detailed record as mentioned in the agreement and make sure what portion is going towards the down payment of the home.

The ‘Rent to Own’ document is usually prepared by a lawyer or a conveyancer.  They are qualified and well versed in preparing the rent to own documents.  It is always advisable to have any of these professionals to prepare the documentation to avoid confusion or dispute later.  The sample ‘Rent to Own’ documents are also available on the Internet.