The Lease Contract with the Option to Purchase

10 de December de 2021

The Leasing Agreement with purchase option has become fashionable, but it has nothing new, it is an old formula in Spain with well-defined jurisprudential antecedents in the 30s and that takes effect again in times of crisis like the current one, especially among young people with greater difficulty in accessing the mortgage market.

Lease with the option to buy: What is it?

The Lease or Rent Agreement is an atypical contract that includes two legal businesses formally united in a single document.

Basically, it is defined as a lease contract that introduces a clause that attributes to the tenant or lessee the right to buy the property within the agreed term.

The lease with purchase option does not have an autonomous regulation in our order so that the two parties enjoy a wide margin of negotiation.

Since you can agree on what you want, a balance must be reached between the different positions, understanding their advantages and disadvantages:

Advantages of the lease with the option to buy

  • For the tenant or future buyer, the advantage of renting with the option to buy is that it does not waste the money destined for the rent, since it can be charged to the purchase price. In a way, it is a kind of savings for the future home, while you can amortize the reforms or improvements you make to it without depending excessively on a bank mortgage.
  • For the lessor and future seller, the lease with the option to buy guarantees an immediate rental income and a real expectation of sale; It is a contractual modality that works well for older homes that would require an overhaul before being put on the market since it saves the initial investment.

Disadvantages of the lease with the option to buy

The contract generates more rights for the lessee or future buyer than for the lessor since it limits the sale price and the power to dispose of, and it may happen that the tenant does not exercise the option in the end.

Reserve or premium fund: Key element in a lease with the option to buy

The inequality suffered by the owner around the lease with the option to buy means that in practice a premium is requested in such a way that if the tenant does not finally buy the house, the landlord can make it his own.

This means that in practice it is a formula that has little use, being applied mainly to unique homes that do not have a high demand for sale, such as those located in rural areas, old homes, homes in neighborhoods with little interest, or when the parts are related by friendship or kinship ties. In isolation, some “bargains” may appear in cases of old houses in good areas where, for both to sell and to rent, the owner has to make a large investment that he is not sure to amortize in the short term.

Regulations on lease contracts with the option to purchase

As we have indicated previously, there is no specific regulation for the lease with the purchase option, and different rules apply to the different parts of the contract.

When setting up the lease with purchase option, the regulation of urban leases contained in Title II of the Urban Leases Law is usually used. The principle of autonomy of the will means that it will be subject to the manifest will of the parties.

With regard to the rights and obligations derived from the purchase option, the situation is different depending on whether the contract is entered into in Catalonia, Navarre, or in the rest of the Spanish territory. This is due to the fact that these autonomous communities have specific norms that regulate the real right to purchase option, while in the rest of Spain there is no regulation, and it has been defined by jurisprudence.

In the particular case of Catalonia, the applicable legislation is that contained in articles 568-8 to 568-12 of the Fifth Book of the Catalan Civil Code, which establishes the purchase option as a real right over a property.

The term clause in the purchase option contract to the purchase option as a real right on a property.

The essential configuring element of the lease with the option to purchase is the insertion of a clause by which the power of the lessee to buy the object of the lease within a specified period is established; therefore, it is essential to establish the duration of this right will be and the time or period of its exercise (which usually coincides with the duration of the right).

The price of the call option

The lease contract with the option to purchase can be constituted onerous or free, depending on whether or not a price or premium has been contemplated as consideration for the acquisition of the right, and if it was onerous if the premium is charged or not on account of the purchase price.

It is also necessary to determine whether the rent paid by the lessee during the term of the lease until the exercise of the purchase option will be charged to the purchase price or only a part.

Should the lease with purchase option be registered in the Property Registry?

The purchase option contract is inscribable in the Property Registry provided that it relates to real estate and has been granted before a notary public by means of a public deed.

Are you looking for a lawyer specialized in real estate operations who know the lease with the option to buy?

Work with us, and you will get advice both as a tenant and future buyer and as a seller and current landlord.