Rent-To-Own Homes


A rent-to-own home arrangement, also known as a lease-to-own or lease-option, is a type of residential lease in which the renter has the option to buy the property at some point during the lease term. As a landlord or renter of a single-family home, you may reap certain monetary and other benefits from the arrangement like:

  • Reasonable housing costs for a renter who may not be able to get a mortgage, and for the landlord, the possibility of a sale without having to advertise or engage a realtor.

The article will go through these advantages, as well as potential pitfalls and necessary legal considerations. To understand the legal things better you should contact Stop Renting Perth who will help you from start to end. 

Components of the Rent-to-Own Home Agreement

Actually, there are two separate contracts at play in a rent-to-own arrangement:

  • A conventional rental arrangement, and
  • A choice to buy.

You have the option of combining them into a single document or preparing and signing them as two distinct papers.

What Exactly Does the Rental or Lease Agreement Contain?

For rent to own properties before the renter exercises their option to buy the home, the landlord retains legal ownership of the residence under a rent-to-own arrangement. So, instead of a home purchase, this type of agreement begins with a standard rental agreement.

Accordingly, the rent-to-own agreement’s underlying agreement is identical to a regular lease agreement between a landlord and a tenant, including such terms as the duration of the lease period, the amount of rent to be paid, and the responsibilities of both landlord and tenant with regard to repair and maintenance. Ten Terms to Include in Your Lease or Rental Agreement contains further information regarding standard clauses.

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A Brief Overview of the Option to Purchase Agreement

For the purpose of buying a home in Perth tenants can pay a premium to have the “option” (right) to buy the rental property at the end of their lease (option fee). The cost is often paid in advance and may take the form of a rent increase (some of which is applied to the house purchase).

If the renter decides against buying the property, what happens then? The fact that the renter is not eligible for a return of either the choice fee or the rent will likely make the landlord delighted.

Due to the high stakes involved for both parties, it is essential that the option to purchase spell out all relevant terms and circumstances, including the option time and the agreed-upon purchase price of the property.

Important Terms in Option to Purchase Agreements  elaborate on these and related concerns in further depth.

Tenant and Landlord Responsibilities in a Rent-To-Buy Properties Agreement

Let’s compare and contrast a standard lease with one that includes a lease option.

Multiple Rental Payment Options Available

Tenant in a rent-to-own agreement is obligated to pay rent in a timely manner and in the precise amount required by the agreement’s terms, just as they would be in a traditional lease or rental agreement. Rent under a rent-to-own arrangement, however, is often greater than it would be in a regular lease.

This is because a certain portion of each month’s rent is set aside in an escrow account to be used as a down payment when the time comes to actually buy the property.

The proportion of rent agreed upon should be held in escrow by the landlord. Either the landlord keeps the escrow money and gives it back to the renter when they buy the house, or the landlord puts a portion of the rent toward the down payment. As the lease term progresses, the renter gradually increases their stake in the property.

Repairs to the Rental Property are Carried Out by the Tenant Who Intentends To Buy House In Perth

Tenants in a rent-to-own arrangement normally pay for necessary repairs themselves, as compared to the landlord in a regular lease.

Since the renter would likely earn ownership of the property in the long run, many landlords and renters view this as a mutually beneficial arrangement.

The renter has an interest in keeping it in excellent condition and the freedom to make aesthetic changes to suit his or her tastes without fear of retaliation from the landlord. 

The tenant may even install better supplies than the landlord would pay for (though this is unlikely in a situation where the tenant is busily saving up to buy the entire house).

All the legal issues are complicated so it’s better to consult a professional like Stop Renting Perth, who will help you understand all the requirements and necessities to have a rent to own home

Frequently Asked Questions

Can I rent out my house without telling my mortgage lender?

Without the lender’s consent, it is a violation of the conditions of a home mortgage to rent out the property. That’s mortgage fraud, plain and simple. The repercussions may be severe. Your lender may demand quick payment of the mortgage if it finds out about the situation.

What happens if you get caught living in a buy-to-let?

This is what may happen if you are found living in a mortgaged buy-to-let property: A bad landlord might report you to a database of bad landlords. In 2018, authorities began using this information to track down shady property managers who have been caught with infractions and/or unlawful behavior.

Can my daughter live in my buy-to-let property?

Having a family purchase to let has several advantages: Rent to relatives and friends at a discounted rate. You are welcome to use the home as a residence if you find yourself in a bind.

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