A lease purchase agreement is an agreement in which the buyer and seller
enter into both a lease agreement and a purchase contract at the same
time. The buyer will lease the property, for example, for one year, and
at the end of the one-year period the buyer is obligated to purchase the
property by closing escrow. Buyer (tenant) runs the risk of obligating themselves in purchasing a home that may not be at current market price.
A lease purchase agreement provides the seller (landlord) the most security outside
of an out-right sale, as it contractually guarantees the eventual
purchase of the property by the buyer (tenant). However, both parties
should be cautious if the agreement can not be fulfilled if buyer can not obtain financing to buy the property.
If the buyer (tenant) ultimately
decides NOT to buy the house, he or she faces the potential consequences
of a broken contract in addition to losing the deposit and rent
premiums. The seller, then, also faces legal expenses in pursuing the