A rent-to-own agreement is one of the versions of the lease agreement with an extension for the purchase process. Creating this document and signing it by both landlord and tenant means that the latter party can buy it after a period of renting. There are some peculiarities that people should know before preparing this form. If you have to fill out a rent-to-own agreement but do not have enough knowledge on the topic, you can get all the necessary information from this review.

What is a Rent-to-Own Agreement?

When a tenant wants to purchase a property after some period of its renting, they are obliged to comply with determined terms and conditions. The rent-to-own agreement includes all these rules of transferring of the property after its use by the renter. Moreover, this document is legally binding, and it assumes the implication of liability in case of non-compliance with set conditions.

As regards the topics covered in the rent-to-own agreement, usually, people describe the following aspects in detail:

  • monthly payments;
  • payment terms
  • grace terms
  • duration of the lease
  • personal information about property owner and renter

Creators of the form can extend the list of the details they include in the rent-to-own agreement in some cases. Here, we will describe the creation of a rent-to-own agreement in the most common cases.

When You May Need a Rent-to-Own Agreement

There are some particular circumstances when a buyer cannot pay for the property when signing the contract, but they want to occupy it. For instance, a buyer may not have enough money for a downpayment, or the bank does not allow the person to take a loan.

In these cases, landlords prefer to protect themselves and their property from fraud by having a legally binding confirmation of the purchase and future payments. A rent-to-own agreement is the most suitable document for this purpose because it determines the rules of purchase in advance.

Pros and Cons of Using a Rent-to-Own Agreement

As a rent-to-own agreement is always concluded between seller and buyer, there are two viewpoints on the advantages and disadvantages of this form. For this reason, we will describe the pros and cons of this document for each party separately.

Landlord’s Perspective


  • First, landlords can be sure that tenants will take care of the property because they will buy it in the future.
  • Furthermore, it is an easy opportunity for property owners to earn money from this source even before the official sale.
  • Even if buyers change their minds during their stay in the property, they will pay a fee for refusal to purchase. It means that the payments will cover some costs for searching for new buyers.


  • On the contrary, landlords can lose money by setting the price for property a year before the final sale if the market has changed. For example, the market price for the flat can increase, and the property owner can have more beneficial options to sell it, but a rent-to-own agreement will not allow it.
  • On the other hand, the price can decrease, and buyers will refuse to buy the property. In this case, a landlord will be in a non-profitable position after the renting period.

Tenant’s Perspective


  • Concerning the benefits of concluding a rent-to-own agreement for a tenant, this document fixes the price of the property, and it will not increase to the moment of final payment. It means that buyers do not need to worry about the market changes while they are earning enough money for the purchase.
  • One more advantage of such a deal is that the buyer has time to take a loan or collect money and does not need to pay the full price of an estate at once.


  • There is a risk that buyers can lose an opportunity to earn money during the lease period. In this case, they need to follow the rules of the contract and may be liable for non-compliance with the terms of the rent-to-own agreement.

What Are the Main Components of a Rent-to-Own Agreement

One part of this form should consist of the same parts as a rental agreement, but additional components should be included in the rent-to-own agreement form.

1. Description of property

First of all, it is important to provide detailed information about the property, its state, location, and filling. As a buyer can terminate a rent-to-own agreement, the seller needs to control the condition of the living place before the stay of the buyer and after. Moreover, all documents connected to the property should include exact data about the estate, such as address and other details.

2. Personal data

The second part of the rent-to-own agreement should consist of information about the buyer and the seller. So, you must fill in the full names of both parties, their contacts, and the numbers of some required documents.

3. Conditions of the lease agreement

The creation of a rent-to-own agreement assumes that there is a lease period before the purchase. That is why you should describe all terms of rent, amount of monthly payments, and deposit amount. Also, you have to clarify the preferable method of payment in this form.

4. Terms of purchase

The next part of the document is devoted to the purchase of the property. The buyer and the seller have to agree about the price of the purchase and the way they include monthly payments into this price. An important point to mention in the form is the agreement about conditions of termination of the contract. For instance, you should write the conditions for this operation, costs, and terms.

Depending on the situation, you can include additional parts into this document, but it is advisable to consult with a lawyer before creating the form and signing an agreement.

How a Rent-to-Own Agreement Works

In general, a rent-to-own agreement helps fix the rules connected to both lease of the property and its sale. So, it legally reinforces the whole process of property transfer. A rent-to-own agreement works almost the same way as a rental agreement, but sometimes, it introduces other specifications. One of the main dissimilarities is the monthly price for the lease because it is higher than usual. Furthermore, this form establishes the responsibility of the buyer and seller regarding facilities and their repairs. In most cases, the future buyer of the property bears all responsibility for furniture and devices.

We recommend you create a rent-to-own agreement together with an attorney because all the cases are different, and the terms of the agreement depend only on the seller and the buyer.

You can use a template of the rent-to-own agreement from the Internet and fill it out together with a second party, but you should check its correctness with a specialist before signing it.