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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Mousli, a vocal supporter of rent-to-own scheme, said that the concept is the future of the region's real estate sector as it eliminates the entry barriers that hold many prospective buyers back.
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In a rent-to-own scenario, you're paying above-market rent.
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'They also ask that crew members be given an option to buy low-cost housing units or rent-to-own units,' he said.
Although still in its early stages in terms of reach and volume, the scheme has begun to re-emerge as a viable option for both buyers and sellers after the Dubai Land Department (DLD) launched the rent-to-own (Ijarah) service last year, allowing such deeds to be registered.
Their new guidelines will set a 100% credit cap, meaning rent-to-own stores will only be able to charge interest up to the value of the product, bringing costs down by hundreds.
He said: "Rent-to-own and other high-cost credit will continue to put a strain on low income households who have little choice but using credit to pay for essential goods.
Gillian Guy, chief executive at Citizens Advice, said: "This cap is a win for those struggling with the runaway costs of rent-to-own agreements.
Quezon City Mayor Herbert Bautista has approved an ordinance providing the beneficiaries of selected Bistekville socialized housing projects in the city to officially own residences through the rent-to-own option.
A PRICE cap on the rent-to-own sector which could save consumers up to PS22.7m per year has been proposed by the City regulator.
HARD-UP families bagging a Black Friday deal from rent-to-own chain BrightHouse face paying twice as much for the "bargain" - and still forking out in 2021.