Is an e-signed addendum legally binding?

Yes, generally. Electronic signatures meeting intent, consent, attribution, and retention standards are legally enforceable under the ESIGN Act (15 U.S.C. ch. 96) and UETA where adopted.

Do I need a notary to record the option?

Recording rules vary. Deeds typically require notarization; whether the option itself should be recorded depends on state practice and whether the addendum creates an interest in land.

How is the option fee treated at closing?

The addendum must state whether the fee is credited against purchase price or forfeited. Absent clear language, disputes can arise over application of funds at closing.

What if the tenant misses the exercise deadline?

Missing the deadline commonly causes forfeiture of the option right and fee. Strict adherence to notice methods and deadlines in the addendum is required to preserve rights.

Can the addendum be revoked after signing?

Revocation depends on contract terms and mutual agreement. Unilateral revocation after valid execution and delivery may be a breach unless the addendum permits withdrawal.

Should I record the option with the county recorder?

Recording may protect buyer priority but can expose sellers to title encumbrance complexities; consult title counsel to weigh notice benefits against encumbrance effects.

Electronic Signature
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Option to Purchase Addendum to Residential Lease Agreement

Option to Purchase Addendum to Residential Lease Agreement

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

OPTION TO PURCHASE ADDENDUM
TO RESIDENTIAL LEASE AGREEMENT

This Option to Purchase Addendum to Residential Lease Agreement is entered into by and between hereinafter referred to as "Lessor", and hereinafter referred to as "Lessee".

For the valuable considerations described below, the sufficiency of which are hereby acknowledged, Lessor and Lessee do hereby covenant, contract and agree as follows:

1. GRANT OF LEASE: Lessor does hereby lease unto Lessee and Lessee does hereby rent from Lessor the personal residence located at as described in the Residential Lease Agreement signed on and attached hereto.

2. OPTION TO PURCHASE: Lessee is hereby given an option to purchase the leased premises at any time up to the date of termination of this lease for a purchase price of $ payable in cash at closing. This option to purchase shall be exercised by Lessee by giving ( ) days notice in writing to Lessor. Within ( ) days after Lessee has exercised this option as herein above provided, a contract of sale shall be executed by Lessor and Lessee, and the sale will be pursued to closing per the terms of said contract. During the duration of the Option, Lessor may not offer the premises for sale to any person except Lessee.

3. ASSIGNMENT OR TRANSFER: Lessee shall not have the right or power to transfer, assign or sublease this option or any provision thereof without the express written consent of Lessor.

4. HEIRS AND ASSIGNS: It is agreed and understood that all covenants of this option shall succeed to and be binding upon the respective heirs, executors, administrators, successors and assigns of the parties hereto, but nothing contained herein shall be construed so as to allow the Lessee to transfer or assign this lease in violation of any term hereof.

5. ENTIRE AGREEMENT: This agreement contains the entire agreement between the parties hereto and neither party is bound by any representations or agreements of any kind except as contained herein.

***

WITNESS THE SIGNATURE(S) this the day of 20

LESSOR

LESSEE

LESSOR

LESSEE

What the Option to Purchase Addendum Is and when it applies

An Option to Purchase Addendum to Residential Lease Agreement is a contract attachment that gives a tenant the right, but not the obligation, to buy the leased residential property under pre-agreed terms during a defined option period. It typically sets the option fee, purchase price or price formula, inspection and financing contingencies, closing timeframe, and how exercise notice must be delivered. The addendum modifies the lease relationship without conveying ownership until the tenant formally exercises the option and the parties close the sale under the addendum terms.

Why parties include an option addendum

The addendum preserves a purchase opportunity for the tenant while providing the landlord an upfront option fee and clearer sale terms. It reduces later negotiation friction, fixes price or pricing method, allocates closing responsibilities, and creates enforceable timelines that benefit both parties when properly drafted and executed.

Who commonly uses this addendum

Typical parties and roles that rely on an option addendum in residential leases.

Tenant / Prospective buyer: Uses the option to lock terms and buy later without immediate purchase obligations.
Landlord / Seller: Secures nonrefundable option fee and clarifies sale mechanics to avoid future disputes.
Broker / Real estate agent: Facilitates terms, coordinates inspections and closing logistics between parties.

Core components a professional Option to Purchase Addendum includes

A complete addendum clearly defines the option fee, exercise window, purchase price mechanics, inspection and financing conditions, title and closing responsibilities, and recording or notice procedures to avoid ambiguity and support enforceability.

Option Fee

Specifies amount paid for the exclusive right to purchase; states whether fee is credited toward purchase price or nonrefundable.

Option Period

Defines the exact start and end dates and time for exercising the option; clarifies time-zone and delivery method for notices.

Purchase Price

Sets fixed price or pricing formula (appraisal, market-based adjustment); explains contingencies affecting final price calculation.

Exercise Procedure

Describes how the tenant must give notice, required form or language, and any required deposits on exercise.

Conditions and Contingencies

Lists inspections, repair credits, financing approval conditions, and responsibilities for curing title or defects.

Closing and Recording

Allocates closing costs, date/window for closing, seller deliverables, and whether the option will be recorded or remain unrecorded.

Essential data fields to include

Property Address: Full street address

Tenant Name: Legal name(s)

Landlord Name: Legal owner name

Purchase Price: Dollar amount or formula

Option Term: Start and end dates

Signatures: All parties and dates

Step-by-step: completing the Option to Purchase Addendum

Follow these sequential steps when preparing and executing the addendum to reduce errors and preserve enforceability.

01

Draft terms: Define fee, price, period, and contingencies.
02

Review finance: Confirm mortgage or lending conditions.
03

Sign and date: Obtain signatures from all parties.
04

Deliver notice: Record or deliver per notice clause.

How to configure the addendum for online workflows

Set up the document fields and signing order in your eSignature workflow before sending to ensure clarity and auditability.

Field	Configuration
Signature Fields	Place signer-specific signature and date fields in signing order.
Exercise Notice	Include a checkbox and date field for tenant exercise confirmation.
Conditional Fields	Show financing contingencies only if exercised by tenant.
Attachment Slots	Allow upload for inspection reports and proof of funds.

Where to file or send the executed addendum

Execution is only part of the process; designate recipients and recording steps to maintain a complete transaction record.

Landlord Copy: Delivered to landlord or managing agent.
Tenant Copy: Provide tenant a signed copy immediately.
Title Company: Send to title/escrow for closing coordination.
County Recorder: Record only if recording clause requires it.

Digital signing and delivery considerations

Use an eSignature platform that supports audit trails, conditional fields, and secure document storage.

Authentication: Email, SMS, or KBA options
Audit Trail: Timestamp, IP, and action log
File Formats: PDF and DOCX supported

Key timelines and timing expectations

Track option windows and related deadlines carefully; missed timelines can forfeit rights or create disputes.

Option Period End Date:

Last day tenant may give exercise notice.

Notice to Exercise Deadline:

Method and time by which notice must be delivered.

Inspection Period:

Time allowed to complete property inspections.

Financing Contingency Date:

Deadline for lender commitment or waiver.

Scheduled Closing Window:

Date or range to complete closing transaction.

Common drafting and execution mistakes to avoid

Ambiguous price formulas that reference undefined indices or fail to specify appraisal methodology create valuation disputes at closing.
Vague notice provisions that omit delivery methods, time zones, or acceptable recipients can nullify an exercise notice.
Failing to state whether the option fee is refundable or credited causes disagreement on closing credits and forfeiture.
Not aligning lease defaults and option obligations may leave parties uncertain about remedies and timelines.

Penalties and legal risks of an incorrect addendum

Forfeited Fee: Tenant may lose option fee

Unenforceable Term: Ambiguity can void option

Title Defects: Buyer may inherit issues

Late Notice: Missed exercise rights

Tax Consequences: Incorrect reporting risks

Litigation Costs: Disputes lead to legal fees

eSignature vendor pricing and capability snapshot for executing addenda

Select an eSignature provider based on price, required features (audit trail, HIPAA BAA if needed), bulk send, and envelope limits; signNow is listed first for comparison.

	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	Yes, 7-day trial	Varies	Varies	Varies	Varies
Bulk Send	Yes	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No
Envelope Cap	No limit	100 envelopes/user/year	Varies	Varies	Varies

Frequently asked questions about the Option to Purchase Addendum

Answers to common legal, timing, and execution questions to reduce uncertainty when drafting or exercising an option.

Need help? Contact support

Is an e-signed addendum legally binding?
Yes, generally. Electronic signatures meeting intent, consent, attribution, and retention standards are legally enforceable under the ESIGN Act (15 U.S.C. ch. 96) and UETA where adopted.
Do I need a notary to record the option?
Recording rules vary. Deeds typically require notarization; whether the option itself should be recorded depends on state practice and whether the addendum creates an interest in land.
How is the option fee treated at closing?
The addendum must state whether the fee is credited against purchase price or forfeited. Absent clear language, disputes can arise over application of funds at closing.
What if the tenant misses the exercise deadline?
Missing the deadline commonly causes forfeiture of the option right and fee. Strict adherence to notice methods and deadlines in the addendum is required to preserve rights.
Can the addendum be revoked after signing?
Revocation depends on contract terms and mutual agreement. Unilateral revocation after valid execution and delivery may be a breach unless the addendum permits withdrawal.
Should I record the option with the county recorder?
Recording may protect buyer priority but can expose sellers to title encumbrance complexities; consult title counsel to weigh notice benefits against encumbrance effects.

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