Lease Option contract mechanics (long) - Posted by chris

Posted by B.L.Renfrow on December 19, 1999 at 09:10:51:


Yes, you are correct that your option IS a purchase contract, but with the addition of the option clause(s). In other words, the purchase option should contain all of the terms of the sale, including those you indicated.

I always use two separate contracts; a lease agreement and a purchase option/agreement, although I know there are plenty of people who use a single agreement, when they are the T/Ber. I find it easier to explain to the prospective seller, when there are two separate agreements involved, plus the use of two distinct agreements provides at least theoretical protection against a lender easily discovering the existence of an option, which typically constitutes a breach of the mortgage agreement.

And yes, there certainly should be a clause in the option agreement that prohibits the seller from further encumbering the property during the term of the option. Also, consider recording a memorandum of the option, which provides further protection against a seller doing exactly that.

You may want to check Bill Bronchick’s site ( to see whether he has his L/O contract example posted there; I don’t remember.

Brian (NY)

Lease Option contract mechanics (long) - Posted by chris

Posted by chris on December 18, 1999 at 04:40:35:

If I have a property under control as a tenant/buyer with a lease option contract that I know I want to exercise the option on in the future, what do I need to do?

Do I have to write up a seperate purchase contract with all of the details such as who pays for closing costs? The L/O forms I have seen have the lease part fairly detailed, but they do not have the purchase clauses that a good purchase offer has.

Another thing that comes to mind is having a written promise from the seller stating that they will not place any further liens such as home equity loans on the prop.

What do you experienced L/O investors do? Without having everything in concrete at the time of doing the lease/option it seems that a seller could turn a good prospect into something you would not want to exercise the purchase on.

Thanks in advance, Chris.