Leases with the option to purchase

A lease with an option to purchase gives the tenant the opportunity to buy the property after a specified period. There are two common forms of this kind of option: a “straight” option and a “right of first refusal” option. Each exists only through specific language in the lease. When either option is exercised, the lease ends and the parties enter a seller-buyer relationship. With a straight option, the tenant can compel the owner to sell at a fixed or determinable price during any point in the lease. If the lease does not limit the period during which the option can be exercised, the option runs for the period of the lease and any extensions to it. The terms of sale must be stated with the same specificity as the terms of a purchase and sale agreement. A right of first refusal prevents the owner from selling the property to a third party without first offering it to the tenant, usually at the same price the third party has offered.