Lease Option Contracts

Lease Option Contracts

Lease Option Contracts are similar to rent to buy or lease purchasing and instalment contracts, and seem to contain the best characteristics of both.

Essentially, using a lease option contract for wrap properties has the same principles as instalment contracts, except that the sale does not take place at the outset of the contract (but rather at the end). Instead of making repayments, the tenant makes lease payments (even though they may work out to be exactly the same figure).

The tenant leases the property for the duration of the agreement, as well as having the exclusive right to purchase the property at an agreed price. If, or when the tenant exercises their option or right, the purchase price reduces by the notional principal that they have paid during their contract period. This notional principle is calculated as though the lease payments were actual loan re-payments.

We always recommend that you seek professional advice as this blog is for general information only