Lease with option to purchase? Please help

2 Replies


I invested into my first home through a lease with option to purchase. The lease was for a 12 month term with 2 options to renew at 200 increases maximum  each year. The option go purchase had two options to renew and no cost mentioned to do so. I am now lining up to give notice to renew for year two and the seller is demanding 5,000 to extend my option and he is removing the ho exemption which was never addressedid causing my rent to go up an additional135 a month on top of the 200 a month cap... can someone please tell me if this is normal or if I beef am attorney?  The language is below.

2. TERM: The term of the OPTION shall be for a period of 12 months plus a 12 month extension x 2, commencing on the 1st day of December, 2014. This OPTION will expire without notice of extension and shall be of no further effect if not extended on or before the 30 day of November, 2015. This OPTION shall also expire and terminate if any monetary or non-monetary default by the Resident under that certain “Residential Lease Agreement” of the Property dated the same date, continues for more than five (5) days.

3. OPTION PRICE: The OPTION price (“strike price”) is: $249,900.00; provided, however, if OPTIONOR concludes at any time before OPTIONOR has received proper notice of extension of the OPTION from OPTIONEE that the fair market value of the property exceeds the foregoing strike price, OPTIONOR may (but is not required to) propose to OPTIONEE that the Option Price be increased to the fair market value of the property as determined by a professional fee appraiser selected by OPTIONOR only at the end of the third option extension.

OPTIONEE shall have seven (7) days to accept or reject OPTIONOR’s proposed increase in the Option Price to reflect its fair market value. If the proposed increase is accepted within said seven-day period, OPTIONOR and OPTIONEE shall memorialize the change of Option Price in a written amendment to this Purchase Option extension Agreement.

If, however, the proposed increase in the Option Price is rejected by OPTIONEE within said seven-day period, the parties shall immediately refer the issue of fair market value of the subject property to binding arbitration by the American Arbitration Association at its offices in Boise, Idaho. The arbitration shall be conducted under the Association’s Commercial Rules. Administrative fees for the arbitration shall be split equally (50/50) between the parties, although the Arbitrator, in his/her discretion, may assess/award the expenses of arbitration (including reasonable attorneys’ fees) against a party whose position in the arbitration regarding fair market value of the property is considered by the arbitrator to be unrealistic, unreasonable, or taken in bad faith.

OPTIONOR and OPTIONEE confirm that time is of the essence of this Paragraph 3. A dispute regarding a proposed increase of the Option Price shall not extend the term of the option, or the time for performance by OPTIONOR or OPTIONEE of any act required of them, or either of them, under this Purchase Option Agreement; provided, however, that if arbitration is necessary to resolve a dispute concerning the fair market value of the property, closing of the purchase and sale agreement under Paragraph 9 (“CLOSING”) shall occur no later than fifteen (15) days after transmission by the American Arbitration Association of its award.

4. OPTION CONSIDERATION: OPTIONEE will pay a fee of $10,000 as a non-refundableoption fee as follows $1400 to be paid on or before 11/24/2014 plus500 due January 1st 2015 for Pet Deposit plus

First installment of 2,000 due by 15th of February 2015

Second installment of 2,000 due by 15th of March 2015

Third installment of 1,500 due by 15th of April 2015

Fourth installment of 2,000 due by 15th of May 2015

Fifth installment of 600 due by 15th of June 2015

which will be applied toward the purchase price of the property if, and only if, OPTIONEE abides by all of the terms of any other agreement between the parties, AND OPTIONEE actually exercises this OPTION timely and purchases the property. In the event OPTIONEE fails to extend the OPTION or defaults under applicable terms of the attached lease, this OPTION will be automatically terminated and the OPTION fee will be retained by OPTIONOR.

Hi Mal - Hi from Boise. No advice to give here, but the language and scenario seem messy.     Re: homeowner's exemption - the owner should not have a home owner's exemption on a home he is not living in. That said, I don't know how he could pass that cost onto you unless it was written into the lease.    I hope that you and the owner are somehow able to work things out!  

Hi Mal,

I am adding to the spot on comment of @JonnaWeber above.  This option contract language seems messy.  An option contract means that you pay a certain cost premium today (either a set upfront fee or higher rents over a period of time) in order to lock in the price now, and you then have the ability to choose to buy or not buy the property at that price at a set later date.  The language in your post does not seem to provide such an arrangement in clear terms.  Ask yourself whether or not you still want to purchase the property?  If the answer is yes, then what I would do in this situation is immediately contact a real estate lawyer to have them review the terms of the agreement to advise you of your options.   Timing is important in these types of matters, so it is best to act quickly to protect your rights.  Also, in the future it is best to have a lawyer review something like this before you sign, they know how to make the language clearer and make sure that it adheres to local law.  I hope you can resolve this situation in a positive way.   Best, Nathan