contract
Lease-Purchase
A lease coupled with a binding obligation to purchase the property at a defined future date and price, unlike a lease option which is voluntary.
In depth
A lease-purchase obligates both parties: the tenant must buy and the landlord must sell at the agreed terms. Rent payments may include credits applied to the purchase price. Because performance is mandatory, courts and the IRS often treat lease-purchases as installment sales from inception. Misconception: lease-purchase and lease-option are interchangeable; they are not. Lease-purchase removes the buyer's discretion, which exposes them to specific performance lawsuits if they fail to close. Practically, lease-purchases work for buyers with imminent qualification timelines and for sellers who want certainty of sale. Both parties should ensure the contract clearly states price, closing date, who carries insurance, and what happens to rent credits if the buyer defaults. Dodd-Frank and state SAFE Act compliance apply if a consumer is buying their primary residence.
Educational content only. Definitions reflect typical usage in US owner-finance and FSBO transactions; statutes and case law vary by state. Consult a licensed real-estate attorney for fact-specific guidance.