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There are many issues to consider in rent-to-own deal

By ERIC P. FEICHTHALER - Real Estate Law | Sep 21, 2023

Eric P. Feichthaler

Mr. Feichthaler,

I am considering a rent-to-own situation where I would rent for the next five years, with an option to purchase at the end. The owner/landlord has agreed to credit $200 every month toward the purchase price. He also has asked for $20,000 down payment for the “option,” which would also apply to the purchase price. Do you see any issues with this?

–Lee D.

Dear Lee,

In our new era of higher interest rates and bank charges, many residents like you are seeking alternative ways to purchase a home. A lease-option is a way to accomplish this. However, like any major purchase, caution should be exercised before signing.

First, we would want to make sure that both a lease and a Purchase and Sale Agreement for the eventual purchase of the home would be signed at the same time. The lease would be written as you have noted, which should be reviewed to confirm there is no conflict with the purchase contract, or terms that are detrimental to you. The same review should be done for the sales contract.

My next concern would be the $20,000 payment for the option. Would the owner have immediate access to this, or would it be held in escrow until the purchase? Is there anything protecting you if the seller left town, died or attempted to sell the property to someone else? One way to protect your contract interest is to require a memorandum of the sale or lease with the county clerk. By doing so, you put all prospective purchasers on notice that you have a contract to purchase the property, and that should stop any type of sale to an intervening buyer.

Of course, you will also want to confirm the numbers being asked for make sense financially for you, based on the current and potential future value of the property. There are many other issues to consider before dedicating that level of money to a transaction well into the future, so I highly recommend seeking legal counsel before proceeding.

Eric P. Feichthaler has lived in Cape Coral for over 35 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Museum of History, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at eric@capecoralattorney.com, or 239-542-4733.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.