Lease Purchase Agreements

Structuring lease purchase agreements has one cardinal rule - use two separate documents!

If you try to use just one document you are setting yourself up for a problem if some Judge interprets your agreement as a land contract. In that case you will have to go through your State foreclosure laws in order to get a bad tenant-buyer out of the property.

By creating a separate lease agreement with a refundable security deposit everyone knows that this is a tenant-landlord deal and you can evict non-paying tenants much quicker.

I make sure that maintenance and upkeep of the property are addressed in lease agreement and have the seller initial that part of the agreement. I do allow the tenant to upgrade the property, although they must get my permission for big changes. I have had tenants put hundreds of dollars into properties and then not purchase them. I also charge tenants a penalty of $5/day if the rent is not paid on time in addition to loss of rent credit.

The option agreement will indicate the sales price and expiration date for the option. I explicitly state the amount of the rent credit and the deadline for receiving it. If the tenants payment is not in my mailbox on or by the first day of the month I do not give them a credit. I do not accept it if they tell me they mailed it on time either but it got "lost" in the mail.

Before you sign the lease purchase agreement have the tenant sign an inventory checklist indicating any problems. That way if they leave there won't be a dispute about things that were in disrepair.

You can find free lease option agreements here.

Finally, I have tenants sign a "Lead Paint disclosure" form.

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