What Does Rent to Own Mean

One essentially stumbles upon this question “what does rent to own mean” when looking out to buy or lease property. Rent to own is a glorious option for people who do not have a good credit record or who have not sufficient fund to make down payment to buy house or other appliances.

One can rent a property at an option consideration wherein apart from paying rent to use the property; an extra equivalent to 1 to 5% of the property value is paid per month to claim possession of the property at the end of the contract. If the contemplated takeover does not see itself to fruition, the renter stands to lose the entire money.

The renter can claim a rent credit by playing good with the owner. The rent to own contract generally spans from 1 to 3 years. The owner may take possession of the property if the rent is delayed and can claim a penalty if damage to property happens.

What is Sublease

Sublease essentially implies renting the property from a lessee and then renting it out to a subtenant. The principal tenant who has entered into the rental agreement with the owner remains accountable to him for observance of all the terms and conditions pertaining to the lease. 

In the event of subtenant defaulting on the rent front or causing damage to the property, the principal tenant remains liable to own it up and to pay the penalties accrued. To stave off such incidents, the Principal tenant takes a security deposit from the subtenant and charges the rent directly from him. 

The Principal Tenant assumes the responsibility of the landlord for the subtenant and may terminate the agreement with him by tendering prior legal notice. The contract agreement to sublease customarily requires granting of explicit permission by original landlord to sublease and the validity is expressly indicated by the signature of the later on the contract.

What is Lease Law

Lease law governs the leasing out of residential or commercial property and is guided prominently by state statutory tenant codes and the common law on renting. The laws lay the ground on which the legal relationship between the renter and landlord is to be framed. 

The lease law attempts to clearly spell out the rights of the landlord and tenant by putting in place terms and clauses to be mutually agreed upon. 

The law expressly indicates the period and nature of contract under which the property interest of the owner is limited after lapse of certain period of time and the right to possession, subleasing the property and restricting entry is bestowed upon the renter. 

The duties of the owner and renter are spelt out in the law and deviation from the same is not legally desirable unless otherwise exempted. The contract agreement is penned keeping in perspective the provisions of the statutory lease law.

Option to purchase agreement

Option to purchase agreement is entered into by a person who does not qualify for conventional mortgage or financing due to poor credit rating. The tenant signs a contract with property owner wherein he indicates his consent to pay a rent to enjoy the property for a fixed period; at the termination of which the renter gets the exclusive right to take possession of it at a price that has been previously agreed upon.

The tenant is required to pay a non refundable option fee which goes towards the purchase price of property. The tenant then shells out an amount typically equivalent to the rental sum on monthly basis which is inclusive of the option consideration and the mortgage fee owed to the owner.

The renter stands to have his entire option fee forfeited if the desired purchase does not take place. In the event of inability to purchase the property at the expiry of contract, the owner can extend the rental period or convert the lease agreement into a conventional rental contract.

What is Lease Option

A lease option is the ability to rent a property with the option to purchase it. The owner and renter enters into an agreement whereby at the termination of the lease option, the renter is bestowed the right to take possession of the property. 

The option is considered by doling out a fee by the renter to the owner which customarily comes around 1 to 5% of the agreed upon purchase price. 

This option confers the right of purchasing the property at a later date to the renter. In the event of failing to exercise the option, the fee is not refunded to the renter. 

The property is appraised at a price con-sensually arrived at considering the cost valid at the time of exercising the option or conception of the contract. The typical length of lease option is 1 to 3 years. 

Everything functions similar to a lease except that a schedule is chalked out when the renter can contemplate to buy the property.

All About Rent to Own Contracts

If you have gotten bored of living in a rented apartment, and want to have your own place, then buying one is the best option. The situation then can become really critical, and you may lose your affordability. What to do then?

The simple solution to that is opting for rent to own contracts. These are also known as rental purchases and are legally documented transactions. This type of transaction started in USA during 1950s and 1960s, and then onward has helped loads of people.

Initially it was meant for various consumer goods but then prospects like real estate also came under the preview.

A question by now is forming in your mind, why rent to own. To answer that, one has to think about the various situations in life. Under some of the situations, one may not have enough money but won’t like to waste it by renting a house, or the way of paying may seem better and convenient to people.

For such requirements rent to own contracts can be really helpful. Under this procedure, you have to pay extra rent for your home per month and at least 5% of the purchase amount as up-front fee.

Among the total amount, the actual rent is taken by the previous owner and the extra rent helps you to buy the place gradually.