Rent to own homes come with a detailed financial agreement between a lessor and a lessee. In the agreement the lessee make the monthly rent payments to the lessor for a specified period of time. Once the period expires, the lessor transfer property rights to the lessee.
Common rent to own homes Toronto agreements are quite soaring between families having low-income and aren’t able to secure a traditional mortgage. A rent to own program comprises of two agreements: a standard lease agreement and an option to purchase. Both these agreements can be incorporated into a single document or two separate documents.
The Lease or Rental Agreement
In a rent to own program, the landlord remains the property owner till tenant complete the agreement terms and purchase the property. In short, the agreement commences with tenancy and ends up with house purchase transactions. Thus, the underlying agreement of rent to own program and regular lease agreements are identical. The terms including lease period duration, rent amount, repair and maintenance responsibilities are also included in these agreements between landlord and tenant.
The Option to Purchase
An option to purchase provides an opportunity for the tenant to buy the rental property within a stipulated time period in exchange of the upfront payment paid or in the form of the rent that is generally higher than the market rate. A tenant, in case not willing to exercise to his/her right to purchase, not entitled to any refund of upfront fee or rent. While many things are at stake for both landlord and tenant. Thus, it becomes utmost important that the agreement covers all the conditions such as option period duration and the purchase price of the house.
Responsibilities of Tenants and Landlords Under a Rent-to-Own Agreement
Here are a few points differentiating traditional leases with a lease-option agreement.
Rent Payment and Planning of Monthly Rents Varies
The tenant is liable to pay monthly payments on time, just as in a regular rental agreement. The rent payments to be paid are higher in a rent to own agreement than in a regular lease agreement. It is because the agreed-upon percentage rent (decided by the landlord) is kept in an escrow account. It is up to the landlord whether he wants to reserve or refund the escrow funds to the tenant upon the house purchase. The tenant frames equity in the house all through the lease agreement duration.
Tenant is Liable to Perform Rental Property Repairs
In traditional lease, the landlord is responsible for making the necessary repairs. But, in rent to own agreement, the repairs to the rental property are usually done by the tenants at their own expense. Generally, landlords and tenants consider it a fair deal as eventually the tenant will be the property owner.
Tenant Need to Meet Lease Obligations
The landlord is titled the property owner till the tenant purchases the rental property. Thus, apart from making the repairs, the tenants are also liable to perform all the duties mentioned in the lease agreement. If the landlord wants, the tenant is not allowed to have pets, must not indulge in any criminal activity and any other activity forbidden in the lease. In case, the tenant violates any obligation, the agreement is considered null and void.
We, at Renting to Own, endeavor to set free the individuals from paying monthly rents and own their own house. Our rent to own homes Toronto portfolio is filled with attractive homes that are ready to move in. Meet today to discuss your requirements.