Rent to Own Legal Questions

A rent-to-own home helps a renter become a homeowner.


A person with bad or limited credit history can purchase a rent-to-own house without upfront financing. A rent-to-own arrangement allows the seller to act as the landlord and receive steady payments while remaining the home's legal owner. A portion of the buyer's rent payments goes toward the purchase price of the property for the duration of the rent-to-own agreement. The buyer has the right to use a purchase option in the agreement to buy the home while the contract is in effect.

Purchase Agreement

A properly signed and executed rent-to-own agreement is legally binding as long as the wording does not violate existing state or federal laws. The rent-to-own contract contains all of the terms of the agreement between the seller and the buyer. The amount of time the contact is effective must be specified in the document, as well as restrictions imposed by the seller and the total purchase price of the home. The responsibilities of each party in the agreement are spelled out in the document. The stated purchase price cannot be renegotiated at the end of the agreement, when full payment is due, unless a permissible clause is included or both parties agree to do so. A house that is worth less or more than when the agreement was signed remains the original price when the buyer exercises the purchase option. Neither the buyer nor the seller can bring a lawsuit in court to fight the agreed-on purchase price. Major defects that were not disclosed on the agreement but discovered after, like house mold, generally allow the buyer to terminate the agreement.

Monthly Payments

The total payment for a rent-to-own home is split into two sections. The option fee is the fraction of the buyer's payment that goes toward the purchase price of the home. The remaining funds, called the rent premium, is the rent money the buyer pays the owner for living in the home. A buyer who fails to purchase the home at the end of the rent-to-own agreement forfeits the option fee to the seller. The buyer cannot sue the landlord to recover the option fee solely based on his own failure or inability to fulfill the purchase option at the end of the agreement term.


Repairs and maintenance are either the seller's or the buyer's obligation, depending on the terms of the agreement. Any repairs made and paid for by the responsible party are generally not refundable. A buyer who makes repairs, like fixing a roof, cannot sue the seller later to recover the cost if she does not use her purchase option before the agreement ends. Repairs made at the seller's cost are not recoverable under any circumstances, unless the repairs were needed because the buyer caused the damage to the home.

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