About two years ago, I had many owners start asking me about marketing their home as a lease purchase option.  With so many inquiries, I thought I should talk with the attorney I work with specializing in tenant landlord law. 

The one thing that he stated that really hit home was that he has seen judges rule a lease purchase contract as a purchase, not as a lease.  The resident didn't pay the rent when due and the owner forwarded the file on for an eviction to be filed.  In the courts for the counties that I work within, an eviction, from filing to the date of a sheriff assisted physical eviction is usually 30 days or less.  Depending on the agreement you have with your attorney, it may cost a couple of hundred dollars. 

If a judge looks at the contract and decides that it's not a lease but a purchase, you are looking at a foreclosure process, not an eviction.  This has to run through the specific legal foreclosure process which can take 6 months or more.  Also, you are looking at legal fees that are starting to run into the thousands. 

Is it easier to go one month without rent as an eviction is processed or several months as you process a foreclosure?  That is something that an owner needs to decide on.

What most people will say - that will never happen to me as I screened the residents really well.  Or, they seem like honest people.  And most owners/landlords are right.  But when life throws a curve that no one is expecting, life's bumps in the road can make other things happen.

As a resident, if you enter into a lease purchase agreement, many owners will request a higher deposit and/or a higher monthly rent.  The owner is trying to cover future losses for the above circumstances or other costs associated with the property.  The owner is taking a chance that you will purchase the property.

Also, as a resident, how are you protected that the owner is paying the mortgage with the increased rents that you are paying?  I've had some residents come to me after being in a lease purchase option and the home was foreclosed upon and they needed a new home.  That is not the way anyone wants to loose a home.

If as an owner and a resident it is decided that a lease purchase is the way that all parties really want to go, consult an attorney that focuses on writing contracts that will keep both parties protected.  I've also been told that having a lease that does not mention the purchase and a purchase contract with a future purchase date listed, is another way to keep all parties protected.  Just remember, only about 4% of all lease purchase options are ever optioned to purchase of the home.

Disclaimer: This in no way should be deemed as legal counsel but just generalities in regards to lease purchase options.  It is very important that you work with people that are very knowledgeable in this field to protect yourself and the property.  This is not something that you should use generic forms for as you are talking about one of the biggest investments many people make - a house.