Lease Option Agreement South Africa
“The combination of rental and option fees shouldn`t cost you more than a typical loan if you originally purchased the property,” he adds. The seller (the lessor) and the potential buyer (the tenant) agree to an agreement whereby the buyer/tenant pays a deposit to the seller/owner and both parties sign a fixed-term tenancy agreement, at which point the tenant can decide whether or not to buy. The lease agreement includes a sale agreement specifying the terms or an offer to purchase (OTP) may be attached to the lease agreement. This OTP will then have a condition that it only come into effect once the option to purchase has been exercised by the tenant. The lease agreement may simply foreshadow the sale (i.e. the tenant does not have the right to vote at the end of the lease and the OTP simply comes into effect under the usual conditions such as debt financing). To solve this problem, many investors are increasingly using a little-known strategy to maximize returns and reduce risk. It is called “rental options.” It is important to note here that if the tenant decides to terminate the contract and not buy the property, the owner of the property (or the financial institution with which you have an agreement) keeps the option payments and the tenant loses them. The most important condition is that an agreement be reached to determine the length of the tenancy agreement under which the tenant may decide to continue to purchase the property. If the tenant wishes to purchase the property during the lease, the contract must indicate how entitled he or she is to purchase it. Well, one answer is to rent a house now from an owner who is willing to give you an option to buy it later at a pre-agreed price. And the possibility is not as unlikely as it sounds. Remember, many homeowners are renting their properties right now only because they have not been able to sell, and there are those who would be very happy to have the prospect of a sale at the end of a lease, and rental income in the meantime by financially healthy tenants, who also have an incentive to keep the property in good repair, because it will be their own.
A written agreement between two or more people (“partners”) with the intention of doing business together by combining money, skills and/or other resources (a “contribution”) with the objective of the interest. The global financial crisis of 2008/9 and its consequences have made leasing options all the more attractive as you don`t need to qualify for a bank loan to use them. In fact, you don`t even need to invest a lot of money in advance. Please note that these legal contracts and agreements are the norm. It is therefore advisable to seek legal advice when entering into the contract. Downloads are FREE and for only R100, R154 or R260 per month membership, you are entitled to professional legal advice, advice and guarantees. But for all options leasing agreements to work, it`s important to put a win-win solution on the table for both sellers and buyers. Jenny Rushin of Betterbond says that about five of the 500-600 contracts they enter into each month are lease offers to purchase. These are therefore not common, but banks such as Absa and African Bank are known to grant authorisation or assist in reflection contracts. The advantage of such an agreement for the potential buyer/tenant is that the contract generally provides that he buys the property at a predetermined price at the end of the lease or earlier – and thus sets the price while leaving enough time to save a deposit. Contact us for competent legal advice and assistance with your real estate sale, real estate rental or sales contract.
In a “Rent to Own” agreement, the option fee is due on a deposit account for the duration of the contract (6 to 24 months). At the end of the tenancy period, the buyer/tenant now has the deposit plus the credit history needed to insure a mortgage.