What is a lease purchase?
A Lease Purchase Agreement is generally an agreement between two people regarding a piece of property. One person is the landlord (and/or the owner), while the other is called the tenant. The owner of the a of property, typically (but not always) a single family home, and decides to sell it on a “Rent to Own” to someone.
The someone, that is the tenant, approaches the owner/landlord and they enter an agreement. The tenant pays an amount to the landlord. This amount is still known as the “rent”. The lease is usually for a fixed period of time, but the property can be closed earlier.
What Are The Different Types Of Tenancies?
Depending upon the term of contract, lease options are grouped into types. According to various sources, the types of tenancies are fixed term tenancy, Tenancy for years, Periodic Tenancy and Tenancy at will.
Fixed-term tenancy is called so as it is for a fixed period of time.
Tenancy for years has no fixed period of time. It can last for any amount of time. The time set is not certain.
Periodic tenancy is the tenancy which is determined by the term of the rent that has been paid. It may be from month to month or so.
Tenancy at will can terminate at any time. Normally, it will occur where the tenancy is not for money.
Formalities and Terms of Lease Purchase Agreement
Before knowing more about lease purchase agreements, you can grasp some information about the Formalities and Terms of lease.
A lease is nothing but a contract for the ownership and profit of lands between the tenant or lessee and the landlord, owner of the property. It is mainly a rental agreement between the two. Lease is a legal method which has the possession of real property for a certain amount of time by paying the rent. The relationship between the “lessee” and the “lessor” is known as tenancy.
After the lease given to the tenant by the landlord, any intrusion regarding the property by the landlord will be unlawful.
But under the following conditions, the tenancy can be broken:-
– If the tenant or landlord, anyone dies
– If the tenant agrees to waste the property
– If the landlord removes his interests in the property
– If the tenant tries to disperse his tenancy
– If the landlord gives the property to another person
Formalities of lease
Before the agreement of a lease, few matters should be considered such as –
1. The words of lease, by which it is made.
2. The various parts of the agreement
3. The formalities that the law needs.
A lease is written in deed. It consists of premises, covenants, conditions, warranty etc.
The formalities for a lease are mainly done with the help of rules and regulations of the jurisdiction. In cases of personal property, rental agreement is made. In order to maintain the Statute of Frauds, tenancy which is more than one year should be written.
Terms of the lease
The duration of the lease depends upon the tenant and the landlord. It may be fixed or it may be for an indefinite period. In case of a fixed period of time, no notice is required after the period terminates. When the term is conditional then the term ends after a certain incident takes place, such as death of the person (tenant or landlord). If the tenancy is periodic, it is renewed after a week or month.
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Lease purchase benefits and tips
The name lease purchase contract came from the term lease with option to purchase contract. It is a combination of the lease contract and the purchase contract. It is a well known financial document from 1970.
A lease purchase contract is a written deal between the seller of a property and the buyer. If a buyer wishes to purchase a property but is not capable for a usual mortgage then this type of contract is used.
1. The lease purchase contract is a very swift, simple and least costly means to purchase or sell a property. It has replaced the conventional adversarial relationship that usually exists between the buyer and the owner. Nowadays it has been very popular as it is beneficial for both the buyers and sellers.
2. If a buyer wishes to buy a certain property but not having sufficient cash with him, the lease purchase contract is the best option for him.
3. From the seller side it is beneficial too as the seller will get a top sales price even if the demand is low.
Having made the preliminary observations the following points are proposed to consider:
1. Buyer should fill a complete application.
2. Owner should check buyer’s credit history and employment history very carefully.
3. Buyer should be very careful to choose the property as this contract is usually offered for that property which is not easy to sell.