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Rent-to-Own Agreement (Lease With Option to Purchase)
This agreement is between (owner) and (tenant) for the home at . It has two parts: a lease, and an option for the tenant to buy the home.
Part 1: Lease
1. Term. From to ( months).
2. Rent. a month, due on day of each month. Late fee: none.
3. Who pays.
| Property taxes | |
| Homeowner's insurance on the building | |
| Renter's insurance on the tenant's belongings | Tenant |
| Routine maintenance and repairs | |
| HOA dues, if any |
4. Other lease terms. The parties will also sign a standard residential lease for this term. If it conflicts with this agreement on the purchase option, this agreement controls.
Part 2: Option to buy
5. Option fee. The tenant pays a nonrefundable option fee of when signing. It is not credited toward the price.
6. Purchase price. .
7. Rent credit. No part of the rent is credited toward the price.
8. How to buy. The tenant may buy by giving the owner written notice by , while not in default under the lease. Closing will take place within days after the notice. The tenant arranges and pays for their own financing.
9. If the tenant does not buy. If the tenant does not give notice by that date, the option ends. The owner keeps the option fee and any rent credits, and the lease ends on its term unless renewed.
10. Title. The owner will deliver title at closing by deed, and will not add any lien on the home during the term without the tenant's written consent.
Owner
Tenant
Date signed:
Option fee, rent credit and purchase price
The three numbers to get right
- Option fee: paid at signing for the right to buy. In this template it is nonrefundable, and you choose whether it counts toward the price.
- Rent credit: the part of each on-time rent credited toward the price if the tenant buys.
- Purchase price: fixed now, so both sides know the number at the end of the term.
Worked example
Price $300,000, option fee $5,000 credited, $200 of a $2,000 rent credited for 24 months. Credits total $9,800, so $290,200 is due at closing. If the tenant does not buy, the owner keeps the fee and the credits under this template, so say that plainly before anyone signs.
What a lease to own agreement should spell out
- The term, rent, due date and late fee, as in any lease agreement (sign one alongside this agreement).
- The option fee, whether it is credited, and that it is kept if the tenant does not buy.
- The purchase price and any monthly rent credit.
- How and by when the tenant gives notice to buy, and how soon closing follows.
- Who pays property taxes, insurance, repairs and HOA dues during the lease.
- That the owner will not put new liens on the home during the term.
Texas: a rent to own contract is an executory contract
In Texas, "an option to purchase real property that includes or is combined or executed concurrently with a residential lease agreement, together with the lease, is considered an executory contract for conveyance of real property" (Tex. Prop. Code § 5.062(a)(2)), when the property is used or to be used as the buyer's residence. The subchapter does not apply to a contract that provides for delivery of a deed within 180 days of final execution (§ 5.062(c)).
For a lease with an option to purchase of three years or less (where the parties have not been in an executory contract on the property for longer than three years), "only the following sections apply": §§ 5.063-5.065, § 5.073 except (a)(2), and §§ 5.083 and 5.085 (§ 5.062(f)). Sections off that list, such as the 14-day cancellation right in § 5.074, do not apply to those short lease-options. What does apply:
| Rule | What it says | Section |
|---|---|---|
| Owner's title | The owner may not sign unless it owns the property "in fee simple free from any liens or other encumbrances" | § 5.085(a) |
| Late fee | No more than the lesser of 8% of the monthly payment or the actual administrative cost of processing it; on $2,000 rent, 8% is $160 | § 5.073(a)(1) |
| Prepayment | No prepayment penalty if the buyer pays the whole amount early | § 5.073(a)(3) |
| Default notice | Written, by registered or certified mail with return receipt, in 14-point bold or uppercase, with the statutory warning on a separate page | § 5.063(a) |
| Right to cure | Rescission or forfeiture only after notice of the intent and of the buyer's right to cure within 30 days; the buyer can avoid it by complying by the 30th day | §§ 5.064-5.065 |
From the Texas Property Code, Chapter 5, Subchapter D, read October 29, 2026. The builder checks the late fee when you pick Texas. Not legal advice; have a Texas real estate attorney review the contract.
Risks a state regulator has flagged
In an April 16, 2018 consumer alert, New York's Department of Financial Services warned that rent-to-own, lease-to-own and land installment contracts are "often ... being marketed to financially distressed consumers," put them "at risk without the protections of a mortgage," and "often do not lead to homeownership." It said these contracts "may violate applicable New York laws and regulations regarding fair lending, mortgage protections, interest rates, habitability" and property condition or disclosure rules (NY DFS).
For an owner, the practical lessons are to keep the terms simple and written, never charge more than you can justify, keep the home in good repair, and make sure the tenant understands what is lost if they do not buy. Screen the tenant as you would any applicant; see the tenant background check rules. If the option expires and you keep renting, use the lease renewal agreement; if the tenancy ends, the lease termination letter.
Frequently asked questions
What is a lease to own agreement?
A lease combined with an option for the tenant to buy the home at a set price by a deadline. The tenant pays an option fee for that right and, often, gets part of each rent credited toward the price.
Is the option fee refundable?
Under this template, no: it is kept if the tenant does not buy, and you choose whether it counts toward the price if they do. Write the choice into the agreement.
Are rent-to-own contracts regulated in Texas?
Yes. Texas treats a residential lease with an option to purchase as an executory contract for conveyance (Prop. Code § 5.062(a)(2)); for terms of three years or less, the default notice, 30-day cure, late fee cap and title rules apply.
What should a rent to own contract include?
The term and rent, the option fee, the purchase price, any rent credit, the deadline and method for giving notice to buy, the closing timeline, and who pays taxes, insurance and repairs.