lease-purchase agreement

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Lease-purchase agreement

An agreement that allows for portions of lease payments to be used to purchase the leased property.

Lease-Purchase Agreement

An agreement between an owner and a renter to rent a property, often but not always real estate, for a certain period of time during which the renter can apply his/her rental payments toward the purchase of property, if he/she desires. For example, suppose one rents a house for $600 per month. In a lease-purchase agreement, the $600 may be held in escrow and may be applied to a down payment on the house at the end of the lease, if the renter so chooses. If the renter does not choose to buy the house, the money in escrow goes to the owner of the property as if it had been rent all along. It is also called a rent-to-own agreement.

lease-purchase agreement

An installment sale.The tenant sometimes pays a higher-than-market rent for the property,with a portion of the monthly payment earmarked as rent,another portion as principal payments,and another portion as interest.

Landlords should not rely on a lease-purchase agreement as a mechanism to keep all payments and bypass foreclosure if there is a default by the tenant.Courts are very antagonistic to such forfeitures. By planning ahead and classifying the different aspects of the monthly payments,you can avoid the possibility of a court deciding things for you or the IRS deciding how to treat the income.

References in periodicals archive ?
Lease-purchase agreements are by no means unheard of, but the one that exists between NCTC and GENAVCO is indicative of a shifting mindset in the Middle East.
This article introduces energy performance contracts and the corresponding benefits of using tax-exempt lease-purchase agreements as the underlying financing vehicle.
Retroactive Legislation, Advanced Ruling Fees, and GST Consequences of Lease-Purchase Agreements Attract TEI Scrutiny
Under its lease-purchase agreements with New York City, UNICEF would save about $170 million over the next 30 years, Boakes estimated.
Lease-purchase agreements flow naturally into these university programs.