What Is a Lease Option?
A lease option is a two-part agreement: a standard lease that gives the tenant the right to occupy the property, combined with an option to purchase that gives the tenant the exclusive right (but not the obligation) to buy the property at a specified price within a specified time frame.
The tenant pays rent during the lease term and, if they choose to exercise the option, purchases the property at the agreed price. If the tenant does not exercise the option, they simply walk away at the end of the lease (though they typically forfeit the option consideration).
Key Components
- Option consideration — The tenant pays a non-refundable fee (typically 1% to 5% of the purchase price) for the right to purchase. This is separate from the rent and security deposit.
- Purchase price — The price is locked in at the time the lease option is signed. It may be set at current fair market value or at a premium to account for anticipated appreciation.
- Rent credit — Some lease options provide that a portion of the monthly rent (often 10% to 25%) is credited toward the purchase price if the tenant exercises the option.
- Option period — The time frame during which the tenant can exercise the option (typically 1 to 3 years).
- Maintenance responsibility — Lease options often shift more maintenance responsibility to the tenant than a standard rental, since the tenant may become the owner.
Florida Considerations
- Contract requirements — The option agreement must be in writing and should clearly specify the purchase price, option period, option consideration, and whether rent credits apply. Ambiguous terms invite disputes.
- Recording — The tenant should record a memorandum of the lease option to protect their interest against a subsequent sale by the landlord.
- Homestead — If the tenant intends to use the property as their primary residence and exercises the option, they can apply for the homestead exemption after closing.
Related Terms
- Lease Agreement — The rental component of the lease option
- Earnest Money — Similar concept to option consideration
- Fair Market Value — Often used to set the purchase price
- Specific Performance — Remedy if the landlord refuses to sell when the option is exercised
Barnes Walker Lease Option Services
Barnes Walker's real estate attorneys draft and review lease option agreements for landlords and tenants. Request a legal inquiry for assistance.
Florida Law Reference
Fla. Stat. Ch. 83, Part II
The Florida Residential Landlord and Tenant Act governs lease agreements, security deposits, maintenance obligations, and the eviction process.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC