California Residential Lease with Option to Purchase (Lease to Own)

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The California Residential Lease Agreement-With Option to Purchase is a form used specifically for a purchase agreement that begins as landlord-tenant lease agreement. Typically there will be a few differences between a standard lease and this type of lease contract. For instance, the rent will usually be higher as part of it may be held in an escrow account until the time of purchase and/or the tenant may carry more maintenance responsibilities as opposed to a standard lease which will have no such concern.

It should be noted that an option to buy is just that – an option. The specifics of the timing and what happens when the tenant decides to either transition to buyer or remain a tenant must be outlined in such an agreement and both parties must be in full agreement of all the terms at the time of signing. Conversely, an option to purchase contract must also outline the results if the Tenant decides not to become a buyer. After all, they will have paid quite a bit of money into an amount that would be applied to the purchase. The specifics of what happens with this money in the event the option to purchase is denied must be defined. Obviously, it is a good idea for both parties to understand the terms they will agree to by signature. This document will be considered a legally binding contract in a California court of law and thus should be taken very seriously by both parties.

It should be noted that while certain terms and disclosures must be included (as a result of either being mandatory by law or simply inherent to the contract) others are more flexible and thus must be entered (i.e. the specific amount of rent, security deposit, or penalties). This form is a reliable method of documenting such information. Once signed by the Landlord and Tenant, it will be enforceable in a court of law should either fail in their responsibilities or obligations.

How to Write

Step 1 – Enter the Day, Month, and Year of the lease agreement.

Step 2 – Enter the name of the Lessor or Landlord

Step 3 – Enter the mailing address of the Landlord. The address will be separated into three spaces. The first will be the Landlord’s Street Address and Suite Number (if applicable), the second space is for the Landlord’s City, and the next space will be for the Landlord’s State.

Step 4 – After entering the Landlord’s state, it will be time to enter the Lessee’s information. Enter the Full Name of the Lessee.

Step 5 – Enter the Lessee’s mailing address. This will also be divided across the next three available spaces (Street Address, City, State).

Step 6 – The next paragraph will define the address of the property being leased. Enter the rented property’s Street Address, County, and State.

Step 7 – The first section will define the “Option to Purchase.” In Item 1, enter the Purchase Price of the rental which may be purchased. This should also be entered as a dollar amount in the following parenthesis.

Step 8 – In Item II enter the final Date the option to purchase may be employed. This Date will be the last day the Tenant may choose to buy the property.

Step 9 – In Item III, enter the Non-Refundable Dollar Amount which will reserve the right to purchase and be applied towards the purchase when the Tenant chooses to buy.

Step 10 – In Item IV, enter the Percentage of the Rent Paid which will be used toward the purchase when the Lessee chooses to buy the property. The Percent should be written out in the first space and written as a dollar amount in the second space.

Step 11 – Item VII will require any Additional Property included in the purchase to be documented in the space provided (i.e. a parking space or storage unit).

Step 12 – The second section will define the Terms of the lease. Enter the Day, Month, and Year the lease shall take effect, how long the lease will remain in effect (i.e. 5 years), and the Day, Month, and Year the lease will terminate.

Step 13 – The third section will cover the Rent involved. The first line will require the agent who may receive the rent along with the address.

Step 14 – The following paragraph shall cover the Penalties involved should there be a delay or difficulty in the rent being paid. The first line will require the Number of Days from the due date afforded to a Tenant who has not paid rent before a penalty will be applied.

Step 15 – The next two lines will require the amount of money the Tenant will be charged for being late along with the Interest Rate (per annum) for the unpaid amount. Both of these numbers should be spelled out and written as a dollar amount.

Step 16 – The last two lines of this paragraph will define the Amount Charged for a bounced check from the tenant. This should also be spelled out and written as a dollar amount.

Step 17 – Section 9 will require the Security/Damage Deposit amount to be entered.

Step 18 – Section 10 (Deposit Funds) will require the number of days a Tenant may expect the returnable amount of the security deposit returned should there be no complications.

Step 19 – Section 14 will define the Default terms. Enter the number of days since the due date of the rent that delinquency (nonpayment of rent) will result in the Tenant losing all considerations and protections of the lease.

Step 20 – In Section 16, enter the number of days a Lessee has to examine the property title.

Step 21 – In Section 19 will define the term of Closing. If the Lessee exercises the option of to purchase, enter the number of days the closing must occur in.

Step 22 – In Section 17, enter the name of the County the property is located.

Step 23 – The last paragraph of the document will require the Day, Month, and Year of the agreement. This should be followed by the Seller/Landlord’s Signature and Printed Name. Following this, the Buyer/Tenant must sign and print his or her name. Finally, both the agent and any witnesses present should sign and print their names.