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Residential Lease with Option to Purchase

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Lease Agreement of Store with an Option to Purchase at the End a Certain Period of Time

Agreement made on the , between of , referred to herein as Buyer and , of , referred to herein as Seller.

Whereas, Lessor is the owner of a business and property described below, and desires to lease the business and property for use as a store; and

Whereas, Lessee desires to lease said business and property for the purposes of operating a store;

Now, therefore, for and in consideration of the mutual covenants contained in this agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Description of Premises

Lessor hereby leases to Lessee the Business and Premises located in the County of , State of , described in Exhibit A attached hereto and made a part hereof and located at , including the business, the building and other improvements, which business, property and improvements are hereafter referred to as the Premises.

2. Purpose

A. Lessee shall use the Premises for the exclusive purpose of conducting a business on the Premises and shall conduct the business during all usual working hours for related business activities, except for periods when prevented by acts of God or other causes beyond the control of Lessee.

B. Lessee shall comply with all governmental regulations affecting the operation of the Premises.

3. Restrictions on Use

A. Lessee shall not conduct any activity that is unlawful, ultra hazardous, or that would increase the premiums for liability insurance on the Premises.

B. All advertising material that is to be affixed to the exterior portions of the building by Lessee shall be submitted to Lessor for approval prior to installation, and all material installed shall be removed by Lessee on surrender of the Premises.

4. Reservations by Lessor

Lessor shall have the right to enter the Premises to inspect the Premises and make repairs, alterations, or modifications as may be required.

5. Initial Term of Lease

The initial term of the Lease shall begin on , and end , unless renewed under the provisions of Section 18 of this Agreement.

6. Rent

Lessee agrees to pay as rent in the amount of $ per month, the first payment to made on , and each subsequent payment to be made in advance on . A late fee of $10.00 per days shall be charged and paid for any rental payment more than 14 days past due.

7. Damages

A. Lessee shall give notice to Lessor of damages caused by natural disasters (e.g., tornado) , and Lessor shall repair the damages within days, during which time Lessee shall be entitled to an abatement on the rental. If more than of the Premises is destroyed by a natural disaster, Lessor shall have the option of refusing to repair or replace the Premises, and Lessee's duty to pay rental under this Agreement shall terminate as of the date of the disaster.

B. Lessee shall be liable for the costs of all damages caused by the negligence of Lessee, and there will be no abatement of rent or termination of this Agreement for these damages.

8. Utilities

Lessee shall contract for all utility services required on the Premises in the name of Lessee and shall be liable for payment for all utility services received.

9. Taxes

A. Lessor shall pay all real property taxes and assessments levied on the Premises. Beginning in , Lessee shall pay all real property taxes and assessments levied on the Premises.

B. Lessee shall pay all personal property taxes and assessments and all business taxes and license fees.

10. Assignment and Sublease

Lessee shall not assign Agreement or sublet the Premises to another party without the express written approval of Lessor.

11. Repairs, Alterations and Modifications

A. Lessee shall be responsible for all repairs to the common areas, accesses, service entrances, parking areas, and the exterior of the building, all repairs necessitated by faulty quality of work in the construction of the building, and all repairs necessitated by casualty losses covered by casualty insurance provided in this Agreement. Lessee shall also be responsible for all repairs required as a result of the negligent acts of Lessee or its agents and all repairs not required of Lessor.

B. All normal maintenance of the Premises will be carried out by Lessee.

C. Lessee may, at its expense, alter or modify the Premises to suit its needs, provided that written consent of Lessor has first been obtained.

12. Insurance

Lessee shall carry fire and any other casualty insurance generally carried on a business of this nature on the Premises during the term of this Agreement in an amount equal to 80% of the appraised value of the insured property, written by a reliable insurer in the name of Lessor and Lessee in proportion to their respective interests in the Premises. Lessee shall furnish liability insurance in the amounts of $1,000,000.00 for each injury to either employees or invitees on the business Premises, $3,000,000.00 for each accident or occurrence, and $100,000.00 for property damage.

Lessor may purchase these policies and charge Lessee for the policies if Lessee fails to comply with this requirement. Lessor and Lessee, together and separately, waive any right of subrogation or any right in tort against the other party, its agents or assigns, for damages to the Premises or to persons in excess of the insurance policy provisions in this Agreement.

13. Bankruptcy

Lessor shall have the option on thirty (30) days' notice to Lessee to terminate this Agreement if Lessee files for voluntary bankruptcy, is placed in receivership, or has involuntary bankruptcy proceedings instituted against it by creditors.

14. Examination of Premises

A. Lessees shall examine the Premises prior to execution of this Agreement and shall acknowledge that the Premises are in satisfactory condition at the time Lessee enters into possession.

B. Lessor has made no representations to Lessee relating to the condition of the Premises except as specifically provided in this Agreement.

15. Default and Forfeiture

Lessor shall, on default with respect to any of the provisions of this Agreement by Lessee, provide Lessee with written notice of any breach of the Agreement terms or conditions. Lessee shall then have Ten (10) days to either correct the condition or commence corrective action if the condition cannot be corrected in Ten (10) days. If the condition cannot be corrected in Ten (10) days, Lessee shall have a reasonable time to complete the correction. Notwithstanding the foregoing, Lessor may elect to enforce the terms and conditions of this Agreement by any other method available under the law, or Lessor may declare a forfeiture of this Agreement by providing Ten (10) days' notice to Lessee of Lessor's intent to do so.

16. Holding Over

A. Lessee shall pay to Lessor a monthly sum equal to the rent specified in this Agreement plus 50% of such amount for each month that Lessee holds the Premises after expiration or termination of this Agreement without authorization by Lessor. This sum shall be liquidated damages for the wrongful holding over.

B. Lessee shall acquire no additional rights, title, or interest to the Premises by holding the Premises after termination or expiration of this Agreement. Lessee shall be subject to legal action by Lessor to obtain the removal of Lessee in the event of any such holding over.

17. Remedies for Lessor

A. Any and all remedies provided to Lessor for the enforcement of the provisions of this Agreement are cumulative and not exclusive, and Lessor shall be entitled to pursue either the rights enumerated in this Agreement or remedies authorized by law, or both.

B. Lessee shall be liable for any costs or expenses incurred by Lessor in enforcing any terms of this Agreement or in pursuing any legal action for the enforcement of Lessor's rights.

18. Lessee’s Option to Extend or Renew

Provided that Lessee is not in default under this Agreement during the original term of this Agreement, Lessee shall have the option to extend this Agreement for additional terms of years by providing Lessor with thirty (30) days' prior written notice. The extended term shall be on the same terms and conditions of this Agreement, except for the provisions regarding basic monthly rent. Basic monthly rent applicable to the extended term shall be at the then established market rate for similar facilities in the area, but in no event less than $ per month.

19. Option of Lessee to Purchase

A. Lessor grants to Lessee the option to purchase the Premises on or before the end of the . The purchase price shall be $ due at closing. Closing shall take place within sixty (60) days of the exercise of this Option by Lessee. In order to exercise this Option, Lessee must give Lessor sixty (60) days written notice of his intent to exercise the Option. Lessor shall convey the Premises by free and clear of all liens and encumbrances, except those that Lessee may have created or suffered and excepting any taxes, assessments, or charges that may have become a lien against the Premises since the date of this Agreement. On the delivery of the above-described this Agreement shall become void.

B. The bill of sale as to inventory and equipment shall be in the form attached hereto as Exhibit A.

20. Waivers

Waiver by Lessor of any breach of any covenant or duty of Lessee under this Agreement is not a waiver of a breach of any other covenant or duty of Lessee, or of any subsequent breach of the same covenant or duty.

21. Governing Law

This Agreement shall be governed by, construed, and enforced in accordance with the laws of .

22. Entire Agreement

This Agreement shall constitute the entire agreement between the parties. Any prior understanding or representation of any kind preceding the date of this Agreement shall not be binding upon either party except to the extent incorporated in this Agreement.

23. Modification of Agreement

Any modification of this Agreement or additional obligation assumed by either party in connection with this agreement shall be binding only if evidenced in a writing signed by each party or an authorized representative of each party.

24. Binding Effect

This Agreement shall bind and inure to the benefit of the respective heirs, personal representatives, successors, and assigns of the parties.

WITNESS our signatures as of the day and date first above stated.

By:

By:

ACKNOWLEDGEMENTS Before Notary Public

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What a Residential Lease with Option to Purchase Is

A Residential Lease with Option to Purchase is a combined rental agreement and unilateral option that gives a tenant the right, but not the obligation, to buy the leased property during or at the end of the lease term. The document sets the lease length, monthly rent, option consideration (fee), option period, and the method for determining or fixing the purchase price. It allocates responsibilities such as maintenance, taxes, and repairs, and defines remedies for default, exercise procedures, and closing logistics. Parties should clearly state dates, amounts, and governing law to reduce later disputes.

Why parties use a Lease with Option to Purchase

This hybrid agreement allows a tenant-buyer to secure purchase rights while living in the property, and enables an owner to collect option consideration and stabilize occupancy. It can bridge financing gaps, lock a future sale price, and allocate repair and inspection responsibilities in advance.

Why parties use a Lease with Option to Purchase

Typical parties and professional roles involved

The document is used by small investors, owner-occupant sellers, tenant-buyers, brokers, and attorneys involved in residential property transactions.

  • Landlords and property investors who want income plus a potential sale opportunity within a set period.
  • Tenant-buyers seeking time to improve credit, secure financing, or evaluate the property before purchase.
  • Real estate brokers and attorneys who draft exercise procedures, disclosures, and closing instructions.

Each role has distinct interests: landlords focus on income and enforceable exit terms, tenants focus on exercise rights and credit contingencies.

Representative signer profiles

Property Owner

An individual or LLC that owns the residence and seeks rental income plus a possible sale. Owners should verify title, insurance coverage, and any mortgage consent requirements before offering an option.

Tenant-Buyer

A renter who negotiates a future purchase right in exchange for option consideration. Tenant-buyers should confirm financing timelines and inspection contingencies before signing.

Essential data elements to include

Property Address: Full street address
Lease Term: Start and end dates
Option Fee: Amount paid for option
Purchase Price: Fixed or formula
Exercise Window: Exact notice period
Signatures: All parties and dates

Step-by-step: completing the lease-option

Follow these core steps from drafting through execution to ensure a complete, enforceable agreement.

  • 01
    Draft or Review: Confirm terms, price method, and contingencies.
  • 02
    Fill Parties: Enter names, IDs, and entity details correctly.
  • 03
    Set Dates and Fees: Specify lease dates, option period, and option fee.
  • 04
    Sign and Store: Have all signers execute and retain originals.

How electronic completion and delivery typically works

The eSignature workflow follows these practical stages to collect legally valid signatures and preserve audit trails.

  • Upload Document: Add the lease-option to the eSignature platform.
  • Place Fields: Insert signature, initial, and date fields.
  • Send to Signers: Deliver by email or secure link for signing.
  • Archive Execution: Store executed PDF with certificate of completion.

Typical digital workflow settings for a lease-option

Configure authentication, signing order, reminders, retention, and templates for repeatable, auditable execution.

Field Configuration
Authentication Method Email link or SMS code; use stronger ID for high-value deals
Signature Order Sequential or parallel signing per negotiation
Automated Reminders Set delivery cadence for unsigned documents
Document Retention Configure secure archival and export settings

Technical considerations for eSigning and storage

Ensure the chosen platform supports secure signatures, audit trails, and the document formats you need.

  • File Formats: Supports PDF and DOCX uploads and signed PDF exports
  • Authentication: Email, SMS, and optional KBA or ID proofing
  • Integrations: Connectors for CRM, cloud storage, and closing platforms

Confirm encryption in transit and at rest, audit trail capture, and exportable certificates so executed agreements meet evidentiary needs.

Key deadlines and timing expectations

Timelines affect exercise rights, closing schedules, and notice windows—document them clearly to prevent disputes.

Option Fee Due:

Due on signing or as otherwise scheduled

Lease Commencement:

Day rent and obligations begin

Option Expiration:

Exact last day to exercise the option

Notice to Exercise:

Specify days' notice required before closing

Closing Window:

Target period for completing the purchase

Milestones from agreement to closing

A compact milestone sequence clarifies responsibilities and when key actions must occur.

01

Negotiation Completed

Parties agree on price method and option terms.

02

Lease Execution

Lease and option signed; option fee paid.

03

Option Exercise

Buyer gives written notice within option window.

04

Closing Completed

Title transfer, funds exchanged, and recording done.

Common pitfalls to avoid

  • Unclear purchase price formula or failure to state whether option fee is credited at closing leading to later disputes.
  • Missing financing contingency language for the tenant-buyer, which can make the exercise obligation unworkable if financing is unavailable.
  • Failure to address maintenance and repair responsibilities, causing disagreements over who pays for significant repairs during tenancy.
  • Not specifying notice procedures and delivery methods for exercising the option, which can void an otherwise valid exercise.

Potential legal and financial consequences

Loss of Option Fee: Nonexercise or default typically forfeits fee
Eviction Risk: Lease default may lead to eviction
Breach Litigation: Unclear terms can trigger costly disputes
Title Defects: Undisclosed liens can block closing
Financing Failure: Buyer may be unable to close
Recording Issues: Improper recording affects priority

Core clauses to include in a professional lease-option

A complete document balances lease mechanics with a clearly drafted purchase option and practical closing procedures.

Option Clause

State whether the option is unilateral, transferable, assignable, the option period dates, and the exact steps to exercise the option.

Purchase Price

Specify a fixed price, escalation formula, or appraisal method and whether option consideration is credited at closing.

Option Consideration

Define amount, payment timing, refundability, and treatment upon default or exercise.

Lease Terms

Include rent amount, due dates, late charges, utilities, permitted use, and subletting rules.

Maintenance Obligations

Allocate responsibilities for routine maintenance, major repairs, and compliance with habitability laws.

Default and Remedies

Describe cure periods, forfeiture, eviction procedures, and post-default title or possession consequences.

Real-world scenarios where a lease-option is used

Two practical examples illustrate how parties structure rights and timing in lease-option arrangements.

Small Investor Use

A landlord offers a three-year option for a modest fee and slightly higher rent to lock in a buyer

  • The buyer improves credit over two years to qualify for an FHA loan
  • At exercise, the option fee credits toward down payment and the closing proceeds per the agreement, reducing market-timing risk for both parties.

Tenant-Buyer Scenario

A tenant signs a two-year lease with a fixed-price option tied to an appraisal cap

  • The tenant pays an option fee credited at closing and requests inspection rights
  • If financing fails, the tenant may forfeit the fee but avoids immediate relocation while improving credit for future purchase attempts.

How to download, save, and bundle supporting documents

Save executed agreements in standard formats and collect supporting documents needed for closing and title review.

Download Formats

Export the fully executed file as a signed PDF (with embedded audit trail) and keep a DOCX editable copy for internal records.

Save Copies

Store one copy with the landlord, one with the tenant, and an archival copy in encrypted cloud storage for compliance.

Supporting Documents

Attach title report, inspection checklist, proof of insurance, receipts for option consideration, and any lender preapproval letters.

Audit Trail

Export the platform’s certificate of completion showing timestamps, IP addresses, and signer actions for evidentiary use.

Practical tips to reduce disputes and close successfully

Adopt clear drafting, consistent data entry, and documented procedures to protect both parties and facilitate closing.

Fix the Purchase Price or Formula
Use a firm price or a clearly defined appraisal or escalation formula to prevent later disagreement about value at exercise.
Describe Option Consideration Treatment
Explicitly state whether the option fee will be credited at closing, refunded on nonexercise, or forfeited on default to avoid surprises.
Include Financing Contingency
If the buyer needs mortgage approval, add a financing contingency with deadlines to protect the buyer and set realistic timelines.
Document Notice Procedures
Specify how exercise notices must be delivered (email, certified mail, platform notice) and when they are effective to avoid timing disputes.

Frequently asked questions about lease-option agreements

Answers to common legal and practical questions about enforceability, electronic signing, exercise, and recording of lease-option agreements.


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eSignature vendor comparison for executing lease-option agreements

Comparison of common vendor features and starting prices. signNow is listed first per platform comparison requirements.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial No trial No trial Yes, limited Yes, limited
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
Envelope Cap No cap 100 envelopes/user/year Varies by plan Varies by plan Varies by plan

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