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Lease Purchase Contract Meaning

Lease purchase contracts are a popular way for people to purchase property, especially if they`re unable to obtain traditional financing. A lease purchase contract, also known as a rent-to-own agreement, is a contract that allows a buyer to rent a property for a certain period of time with the option to buy it at the end of the lease term.

The terms of the lease purchase contract can vary, but typically, the buyer and seller will negotiate the purchase price at the beginning of the lease term. The buyer will then pay an option fee, which is usually a percentage of the purchase price, to secure the option to buy the property at the end of the lease term.

During the lease term, the buyer will make monthly rental payments, a portion of which may be credited towards the purchase price of the property. This credit is known as a rent credit or a rental rebate, and the amount credited can vary depending on the terms of the lease purchase contract.

At the end of the lease term, the buyer has the option to purchase the property for the agreed-upon purchase price. If the buyer chooses not to exercise the option, the option fee and any rent credits or rental rebates paid during the lease term are typically forfeited to the seller.

Lease purchase contracts can be advantageous for both buyers and sellers. For buyers, it allows them to potentially purchase a property that they may not have been able to afford through traditional financing. For sellers, it provides them with a steady source of rental income and the potential to sell their property at a higher price.

However, it`s important to note that lease purchase contracts can be complex and can come with risks. For example, if the buyer is unable to exercise the option to purchase the property at the end of the lease term, they may lose the option fee and any rent credits or rental rebates paid during the lease term.

Overall, if you`re considering a lease purchase contract, it`s important to carefully review and understand the terms of the agreement. Consulting with a real estate attorney or other professional can also be helpful in ensuring that you fully understand your rights and obligations under the contract.

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