An Introduction to Rent-to-Own Home Laws

You might be surprised to learn that there really are no specific federal laws that govern the rent-to-own real estate market. There are however, various state and local laws that could pertain to rent-to-own home lease agreements depending on where you plan to purchase.

Due to the nature of a rent-to-own agreement it can contain areas that appear to be a rental contract and areas that look more like a purchase agreement which puts into a legal gray area. The upside to this sort of arrangement is that both the seller and the purchaser have more flexibility to come to terms in the contract that will best suit the interest of both parties. This makes it especially important that you fully understand the typical terms in a rent-to-own contract so you know what to expect and what to avoid.

Common Rent-to-Own Agreement Terms

There are few more common terms in a rent-to-own agreement that you need to be aware of while searching for a rent-to-own home. These terms are very important to understand when dealing with a potential seller, and can make the difference when you come to the table to sign the contract. While a lot of terms are negotiable these are some items that are typically found in all rent-to-own agreements:

  • Property is sold "as is".
  • Buyer is responsible for maintenance and repairs.
  • Buyer is responsible for property taxes.
  • Buyer cannot perform home improvements without permission from the seller.
  • If the buyer misses payments or violates the contract the seller has the right to evict the tenant and the tenant will forfeit all money in escrow.

Get a real estate attorney

As with any legal agreement you should absolutely get a real estate attorney to review the rent-to-own contract and have them go over the details. A lawyer can help you make the right decisions about a rent-to-own contract and help you negotiate the provisions so that you get the most out of it. Here are some of the more important questions you and your lawyer should be asking about the contract.

  • Are option-fees and rent percentages being applied to down payments?
  • Are down-payments and other money towards a down payment refundable in the event of eviction or if the tenant chooses to not exercise the purchase option?
  • Who will be responsible for repairs, taxes, HOA and insurance during the lease period?
  • Will the tenant be evicted for late payments or other contract violations?

Now that you have a better understanding of rent-to-own home laws, you can view our rent-to-own home listings available in your local area.

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