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Are there any risks in a lease option home purchase?

May 11, 2018
By ERIC FEICHTHALER - Real Estate Law , Cape Coral Daily Breeze

Mr. Feichthaler,

I have a tenant in a home that wishes to buy the property. They have asked for a lease option, but I have not put this together before. Is it difficult, and does it pose any risk to me as owner?

-Patrick D.

Dear Patrick,

The rental market continues to show strength. With interest rates still historically low, but creeping up, many tenants are inquiring about purchasing their homes. A lease option is often used where the buyer is unable to currently obtain financing, but wishes to lock in the ability to purchase the property. In a lease option, a standard lease includes provisions relating to a potential sale. Typically, a portion of the lease payments may be applied toward the final purchase price, or a lump sum may be paid for the option to buy at a later time. For a current owner of rental real estate, the main drawback to a lease option is that the owner will not benefit from an appreciation in value above the option price that is set. The owner and current tenant will negotiate those terms in a way that is mutually beneficial, while limiting risk. At the end of the lease period, the tenant will have the option to purchase at the price and terms specified at the beginning of the lease period. If they decline, the lease will be over, and you as owner can renegotiate a new lease, or they will depart. Whatever amounts you collected toward the purchase price would typically be kept you as owner.

All of these terms are negotiable, and the cost to seek legal advice on the negotiation and preparation of the lease option are likely lower than you would expect.

Eric P. Feichthaler has lived in Cape Coral for 28 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continued his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest from 2011-2015, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 14 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.

 
 
 

 

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