A lease-to-own contract is a binding agreement between two parties in which one party agrees to rent or lease property, car or big-ticket item, with the eventual purchase of the item. Rent to own contracts may be weekly or monthly, and the portion of the payment that goes towards the purchase price is to be determined by both parties. For example, if a customer is doing a lease-to-own contract on an HDTV that costs $2400, their lease-to-own contract may be $300 a month. $200 of the payment goes towards the payment of the TV, while the other $100 is a fee or the amount of money that the seller is charging to do a lease-to-own contract.
Setting up a Lease-to-own Contract
A lease-to-own contract should be looked over by a lawyer before both parties sign it. Despite the need to have it looked over by a lawyer before completion, there a few items that should be included in the contract. The following are important topics to cover in the lease-to-own contract:
? Identify the parties in the lease-to-own agreement. The owner and lessee should be identified, as should the item(s) that are being leased. Also, the overall purchase price should be clearly stated in the contract.
? Establish ownership. The contract should make it clear who retains ownership of the products or goods during the length of the payment period. If it is home, determine the amount of money needed for a down payment or closing cost. Also, both parties should decided if these payments are coming out of the monthly or weekly lease.
? Determine the length of the lease-to-own period. For example, will the lease-to-own contract be for one year, two years or longer. Will ownership transfer as soon as the final payment is made? If so calculate this date, and include it in the contract.
? Determine the lease-to-own payments amount. Calculate the monthly or weekly payment amount of the property or item. This contract should also include information about late fees, returned check payments and interest rates (if any).
? Define what constitutes a default of the contract. For example, non-payment, failure to pay property taxes (if needed) or another type of breach of contract.
Record the Contract
Recording the contract means that both party?s sign, date and acknowledge their agreement of the terms in the lease-to-own contract. It is best to have a witness or notary available to complete this process. Once the lease-to-own contract is recorded, it is legal and binding for both sides.