What is the difference between a lease/purchase and a lease/option?

The legal distinction between a lease/purchase and a lease/option is very important for the owner/landlord. Generally, an owner/landlord DOES NOT want a lease/purchase. This type of transaction is legally viewed as an Agreement for Sale, which gives the buyer/tenant an equitable interest in the subject property. If the buyer/tenant stops making payments, the landlord must first follow the statutory forfeiture procedure (will not take less than 50 days) and then the landlord can start the eviction, which will take another 2-3 weeks. Advice from a real estate agent/broker on this issue will not suffice; an owner/landlord should not enter into a lease/purchase without first obtaining competent legal advice.

A lease with an option is simply that: a residential lease that is either month-to-month or a fixed term (i.e., one year) and a separate agreement (i.e., an Option Agreement) that gives the tenant the exclusive right, but not the obligation, to purchase the rental property at a specified price, upon specified terms, on or before a specified date.  If the tenant defaults under the lease, the tenat may be evicted the same as any other tenant.  Unless there are "cross-default" provisions in the lease and the option, a default under one agreement is NOT a default under the other agreement.  Many times a lease with an option are combined into one agreement, but my recommendation is to always do the lease and option separately.

Comments

[Craig Welton]

I have a lease with option to purchase with people for 6 years. They are always behind a month or more. My lease with option purchase has a 7 day default. Can i take them to eviction court or do i have to forclose?

Response by Carlton C. Casler: Assuming you have a "true" lease with an option to purchase, rather than a lease/purchase, then you may evict the tenants for non-payment of rent. Start with the 5-Day Notice to Pay or Quit, then file the Special Detainer Complaint with the appropriate justice court. Check to see if your option agreement has a "cross default" provision; if not, make sure that it does next time.