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A ͚lease option͛ is a very good agreement for both buyers and sellers. With the help of this
contract, a house is sold over a period of time, usually at the current market value. In this
case buyer (usually an investor) and seller, both are benefited creat ing a win- win situation.
For a lease option to be successful it is critically important that the deal is meticulously
drafted. While making a lease agreement it is better that you take help of a professional
who knows all the clauses and rules and can dra ft the agreement.

á Advantages of the lease option for the sellers

The major benefit is that those wishing to sell can lock in the property at a price at the market value
even when there is slowness in the property market.

á There is usually no cost to selling a property using a lease option, the mortgage payments are taken
over and the seller can ͚walk away͛ and start afresh. This is especially attractive in a slow property
market.
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When it comes to lease option, the seller is assured to attract the best quality clients with genuine
interest in the house (usually an investor). Hence a lot of un-necessary enquiries are eliminated in the
first place itself.
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The buyers (the investor͛s clients) who opt for rent to own option always take better care of the
house and property and are serious about the maintenance and up keep. Thereby the current owner
does not have to worry about the expense of repairs and is assured about the proper protection of his
property until the lease option is exercised and the property sold.
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With a proper contract and precise clauses in place the mentioned factors are covered and hence
peace of mind for the seller is assured.
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When the deal closes; there is no extra cost for the commissions to third parties.
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The seller also gets to retain tax advantages of ownership until the time property is sold.
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With proper structure in place the seller can get debt relief, even if the mortgage is higher than the
market rate.
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Furthermore, there is equity build up as the mortgage balance is reduced.

There are two sides to any leasing agreement, and would do well to be benefitting
both sides as best as it can. Due to so many advantages a lease option is one secure
way to fulfill the dream of owning a property for a buyer. While the seller also gets
to enjoy the situation, which provides equal opportunities, a balanced leasing
agreement is a good bet and very important for a positive final outcome.

Let͛s look at a particular deal from the seller͛s side:

Market value: £159,950

Outstanding Mortgage: £112,000
The seller would like to move on with their lives but the property isn͛t selling. A lease option
can be drafted to offer the market value for 7 years. The buyer (investor) takes over the
mortgage payments for that period.

At the contract end, the property is sold for the market at that time, and any profit (above
£159,950) goes to the investor.

The seller enjoys a profit of £159,950 minus the original mortgage of £112,000 which equals
£47,950. This profit comes back to the seller having made no mortgage payments for the
period of the option. A valuation (or research) would normally be carried out on the
property.

The mortgage payments are the responsibility of the buyer (investor) who pays from the
incoming rent. The investor keeps any profit above the market value of £159,950. It is the
investor͛s risk to judge that the market will rise enough to ma ke a profit.