Definition
Unlike lease-options, lease-purchase agreements require the tenant to purchase at lease end at a predetermined price. If the tenant can't obtain financing, they face default. It's less flexible than lease-options because the obligation to buy is firm.
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Unlike lease-options where purchase is optional, lease-purchase agreements obligate the tenant to buy the property at the end of the lease term. This arrangement works for sellers who want assured sale and buyers committing to eventual purchase. Typically, a portion of rent is credited toward the purchase. The buyer must qualify for financing when the lease period ends to satisfy the purchase obligation. If the buyer cannot obtain financing, they may lose rent credits and any accumulated payments. Lease-purchases are less common than lease-options because they create obligation rather than flexibility.
Pro Tip
Lease-purchases obligate purchase; only enter if confident you'll qualify for financing when the lease ends.
Example
A buyer enters a lease-purchase agreement for $400,000 with $2,000 monthly rent, $400 credited toward the down payment. After 3 years, the buyer must purchase at $400,000 or face default.