Lease Terms

By
Home Inspector with HouseMaster of Lake Norman

Like most real estate laws, the landlord/tenant relationship's common law can trace its roots back to Merry Old England during the Middle Ages!

Lease: A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

Leasehold estate: A way of holding title to a property wherein the mortgagor(think renter) does not actually own the property but rather has a recorded long-term lease on it.

Lease option: An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.

This helped me, from About.com:

Basics of a Lease Option

Buyer pays the seller option money for the right to later purchase the property. The lease option money may be substantial.

Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the lease option.

During the term of the lease option, the buyer agrees to lease the property from the seller for a predetermined rental amount.

The term of the lease option agreement is negotiable, but the common length is generally from one year to three years.

The option money generally does not apply toward the down payment.

A portion of the monthly rental payment typically applies toward the purchase price.

Option money is rarely refundable.

Nobody else can buy the property during the lease option period.

The buyer generally cannot assign the lease option without seller approval.

If the buyer does not exercise the lease option and purchase the property at the end of the lease option, the option expires.

The buyer is not obligated to buy the property.

Rent loss insurance: Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.

If you are getting a loan for rental property, your mortgage lender will probably require this insurance of you.

Sale-leaseback :A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.

The reason a seller might do this is to free up their capital, but still be able to use the property.

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