Important Clauses in a Rent to Own Property Agreement in Vermont
A rent to own property agreement in Vermont is a win-win for both landlord and tenant. There are several important parts of the lease to own agreement that could be disadvantageous to either the landlord or the tenant if the contract is poorly drafted or drafted more heavily towards one party or the other. It is therefore important to have a lawyer review the document before signing it.
Although each Vermont rent to own agreement can vary significantly from agreement to agreement, the items below are typically seen on most contracts and are therefore important to understand before signing any lease to own contract.
Option Fee: this is essentially a deposit paid by the tenant. It usually amounts to several thousand dollars since it is calculated as a percentage of the purchase price of the home. The tenant should ensure that the amount is considered as a down payment on the final purchase price. It should therefore be deducted from the purchase price when the tenant buys the house from the owner. This fee is forfeited if the tenant decides not to buy the house after the lease period ends.
Rent Premium: a typical rent to own property arrangement in Vermont has two main stages. In the first stage, the buyer is a tenant and pays monthly rent. The rent increases by a certain amount every month as opposed to a normal lease agreement. The additional amount is taken as a down payment on the purchase price of the house. This amount is also forfeited when the tenant decides not to buy the house.
Purchase Price: After the term of the lease expires, the tenant has the option to buy the property from the landlord. There is a predetermined amount of money that the tenant is to give the landlord/seller after the expiry of this period to gain full ownership of the house. This amount is the "purchase price" and can be beneficial to a tenant if the property prices in the market have increased since agreeing to the contract. It is however beneficial to the landlord if property prices are on the decrease. In such a case, the home will be worth less after the lease expires, but the tenant still has to pay the agreed upon amount.
Assignment Clause: this clause enables the tenant in a rent to own property agreement to get out of the agreement. The tenant then gives the right to purchase the same property to another person at the predetermined price. This is an ideal back up plan for the eventuality that the tenant fails to get financing before the lease period expires. This clause is not very common since many owners do not usually offer it. It can however be included in the contract with some persuasion. Be sure to ask your landlord if he/she will include an assignment clause in your contract.
Lease Term: a rent to own property agreement in Vermont or elsewhere has many predetermined dates and figures. The contract sets the date when the agreement officially comes into play. This marks the beginning of the lease whereby the tenant pays monthly rent. The tenant is to continue paying rent for a predetermined period of time. The lease term is the period between when the agreement is signed and the time when the tenant is allowed to buy the property. It usually ranges between 1 and 3 years, but this can vary depending on the particular agreement between the two parties. The contract also specifies the date of the month that the tenant is to pay rent and any penalties on late payment. Tenants opt for a longer term if they wish to repair their credit first before buying the house of if there is a downturn in the real estate market.
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