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Lease Option Agreement

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Lease Option Agreement

[State]

WHEREAS [Landlord.CompanyName or Landlord.FirstName Landlord.LastName] (“Landlord”) is the owner of landed property situated at [Location Address], [State] (“Property”).

WHEREAS the Landlord has pursuant to a lease agreement dated [Date] leased the Property (“Lease Agreement”) to [Tenant.CompanyName or Tenant.FirstName Tenant.LastName] (“Tenant”).

WHEREAS the Landlord desires to grant to the Tenant an option to purchase the Property at the end of the lease period under the Lease Agreement (“Option”) and the Tenant desires to receive such Option and the parties enter in this Agreement to set out the terms of the Option and all matters related to it (“Agreement”).

IN CONSIDERATION of the mutual covenants and promises, the Landlord and the Tenant (individually, each a “Party” and collectively, the “Parties”) covenant and agree as follows:

1. Lease Agreement 

The salient points of the Lease Agreement are summarized as follows:

          Monthly Rental     :       [$Rent] per month payable in advance (“Rent”)                  

         Tenancy Period     :       [Start Date] to [End Date] (“Tenancy Period”)                                                    

         Tenancy Deposit   :       [$Deposit] (“Deposit”)                                                            

2. The Option  

The Landlord grants to the Tenant the Option to purchase the Property at the end of the Tenancy Period and the Tenant accepts the grant of the Option by the Landlord on the following terms and conditions:

2.1   Subject to the terms and conditions of this Agreement, the Landlord hereby grants to the Tenant the sole and exclusive right to purchase the Property free of all debts and encumbrances at the end of the Tenancy Period or such other time as the Parties may mutually agree to in writing.

2.2   The Option shall be exclusive and personal to the Tenant. The Tenant agrees not to assign, transfer, sell or otherwise deal in the Option or to attempt any such action without the prior written consent of the Landlord.

2.3   The purchase price to be paid by the Tenant for the Purchase of the Property on exercise of the Option shall be [$Purchase Price] (“Purchase Price”). The Tenant shall also pay for all transfer fees and closing costs.

2.4   As consideration for the grant of the Option, the Tenant shall pay the Landlord a non-refundable fee of [$Option Fee] (“Option Fee”), which shall be payable by the Tenant on the execution of this Agreement. The Landlord acknowledges the sufficiency of the Option Fee as consideration for the grant of the Option. If the Option is exercised by the Tenant, the Option Fee will be deducted from the Purchase Price for the Property.

2.5   The Option must be exercised by the Tenant not later than [Days] days prior to the end of the Tenancy Period. The Option shall not extend into any extension period of the Tenancy Period.

2.6   On exercise of the Option, the sale of the Property by the Landlord to the Tenant shall be conditional on: a) the Tenant entering into a Property Sale Agreement in relation to the Property acceptable to the Landlord not later than [Days] prior to the end of the Tenancy Period; and b) the Tenant having the financial resources or financing available to complete the Purchase of the Property.

2.7   The Landlord shall not sell the Property or grant the right to purchase the Property to any party unless such contemplated transaction is made conditional on the Option being void prior to the execution of such transaction.

2.8   Should the Tenant be in default of any provision of the Lease Agreement, the Option shall lapse and be void for all purposes unless the Tenant rectifies the default within [Days] of receiving a notice of default from the Landlord pursuant to the Lease Agreement.

2.9   If the Tenant fails to validly exercise the Option by the required time, the Option shall be null and void for all purposes as if had never been granted by the Landlord and the Parties shall be released from all obligations pursuant to this Agreement and neither Party shall have a claim on the other Party on any matter relating to the Option. The Landlord shall be entitled to forfeit the Option Fee.

3. Inclusions in the Purchase Price  

On exercise of the Option and payment of the Purchase Price, the Landlord shall convey the land and all structures thereon, permanent or temporary, all boundary fencing and gates, together with all fixtures and fittings and shall include the following items (“Fixtures and Fittings”):

1.                [Item 1]

2.               [Item 2]

3.               [Item 3]

4. No Equitable Interest  

The Tenant hereby acknowledges and agrees that the payment of: a) the Rent during the Tenancy Period; and b) payment of the Option Fee shall not in any way give the Tenant an equitable interest of any kind in the Property. The Tenant further acknowledges that, except for the Option Fee, all money paid by the Tenant to the Landlord in the past and all the money to be paid by the Tenant to the Landlord prior to the Purchase of the Property will not be applied to reduce the Purchase Price in any way. 

5. Financing 

The Tenant shall be solely responsible for arranging the necessary finance to purchase the Property if the Option is exercised. The Landlord makes no representations to the Tenant as regards the future availability of financing.

6. Warranties, Undertakings and Representations

6.1   The Tenant makes the following warranties, undertakings, and representations to the Landlord that: a) during the Tenancy Period the Tenant will maintain the property in good repair and in habitable condition; b) the Tenant shall pay when due all utility and other payments required by the Lease Agreement; c) the Property will not be used for any unlawful purpose; and d) if the Option is not exercised, the Tenant will deliver the Property back to the Landlord in the same condition as it was at the beginning of the Tenancy Period, fair wear and tear excepted.

6.2   The Landlord makes the following warranties, undertakings, and representations to the Tenant that: a) the Landlord will continue to maintain Insurance on the Property as required by the Lease Agreement; and b) the Landlord will continue to allow the Tenant to enjoy quiet possess of the Property during the Tenancy Period subject to ongoing compliance with the terms and conditions of the Lease Agreement. 

7. Maintenance of the Property 

7.1   During the term of this Agreement, the Tenant shall maintain the Property in the same condition as the Tenant received it at the commencement of the Lease Agreement, fair wear and tear excepted. This shall include payment by the Tenant for any necessary repairs.

7.2   If on the exercise of the Option the Landlord fails to convey the Property to the Tenant for any reason except non-payment of the Purchase Price, the Tenant shall be entitled to recover all maintenance and repair costs paid by the Tenant during the Term of this Agreement. Recovery of such maintenance and repair costs shall not prevent the Tenant from pursuing any other remedy available to the Tenant. 

8. Breach by Tenant  

If the Tenant is in breach of any provision of the Lease Agreement or this Agreement for any reason, including abandonment of the Property, the Landlord shall issue a written notice to the Tenant requiring rectification within [Days] days. Should the Tenant fail to rectify the breach within the required time, the Option shall be void for all purposes and the Landlord may be forfeit the Option Fee.

9. Breach by Landlord 

If the Landlord shall be delinquent in making any payment required to be made pursuant to the terms of the Lease Agreement or this Agreement, the Tenant shall have the right to make the necessary payments on behalf of the Landlord to protect the Option. Any amounts paid by the Tenant pursuant to the terms of this Clause shall be fully documented and shall be deducted from the Purchase Price if the Option is exercised by the Tenant. If the Option is not so exercised, the Tenant shall have the right to recover such payments from the Landlord.

10. Closing and Settlement 

10.1 The Landlord and the Tenant shall jointly decide on which title company will conduct the closing for the sale and purchase of the Property.

10.2 Payment of all closing costs shall be the sole and exclusive responsibility of the Tenant.

10.3 At the closing and on payment of the Purchase Price, the Landlord shall convey marketable title in the Property to the Tenant free of all charges, liens or any other encumbrances.

11. Conflicts 

If any conflict arises between the terms, conditions, and provisions of the Lease Agreement and this Agreement, the terms, conditions, and provisions of this Agreement shall prevail in all instances and for all purposes. 

12. Termination 

This Agreement shall terminate on the occurrence of any of the following events at which time the Option shall be void and cease to exist for all purposes:

12.1         The Tenant exercises the Option and each of the Parties fulfill their respective obligations to each other;

12.2         The Tenant fails to exercise the Option by the required time for any reason;

12.3         The Parties agree in writing to mutually terminate this Agreement;

12.4         The Tenant is in breach of the Lease Agreement and/or this Agreement and the Tenant has fails to rectify the breach of contract within the time required in the Landlord’s notice of breach of contract.

13. General Provisions

13.1      Entire Agreement. This Agreement sets out the entire agreement and understanding between the Parties relating to the subject matter of this Agreement.  There are no other conditions, promises, representations or undertakings between the Parties whether oral or written.

13.2 Severability. The Parties agree that if any provision of this Agreement becomes invalid or unenforceable for any reason: a) the offending provision shall be removed; and b) the remaining provisions of this Agreement shall be unaffected and continue to be valid and enforceable for all purposes.

13.3     Amendment.   Any amendment to this Agreement must be mutually consented to by the Parties in writing.

13.4     Waivers. A waiver of a breach of any term of this Agreement or of a default by any Party shall not constitute or be deemed to be a waiver of any other breach or default that may already have occurred, or which may occur. Unless consideration has been received, any such waiver shall not prevent the Party making the waiver from subsequently requiring compliance with the waived obligation or default.

13.5     Delays, Indulgences and Omissions. A delay or indulgence or omission in exercising any right, power or remedy shall not be construed as a waiver.

13.6     Notices. Any notice pursuant to this Agreement shall be in writing and may be sent by: (a) regular mail to the other Party at the address stated in this Agreement and shall be effective 2 days from the date of dispatch; or (b) if permitted in the jurisdiction, by email or other means of written/printed/displayed digital means of communication and such notice shall be deemed to be effective 24 hours after dispatch.

13.7     Successors. The provisions of this Agreement shall be binding on the respective successors, assigns and legal representatives of the Parties.

13.8     Costs. Except as provided otherwise, the Parties agree that they shall each bear their own respective costs for the preparation and negotiation of this Agreement.

14. Applicable Law

The interpretation of this Agreement or any part of it shall be interpreted, construed and governed by and in accordance with the laws of the State of [State] and shall be subject to the exclusive jurisdiction of the federal and state courts located in [County], [State].

 

 

User Note:  All terms and conditions relating to the Option should be clearly stated in as much detail as possible. It is important that both parties have a clear understanding of their respective obligations and entitlements.

This template is drafted on the basis that, except for the Option Fee, no rental or other amounts paid by Tenant during the term of the Lease Agreement will be deducted from the Purchase Price should the Tenant exercise the Option. If any part of the rent or other amounts paid by the Tenant is to be credited to the Purchase Price, the relevant provisions will need to be amended.

The Option Fee can be any amount negotiated between the Parties. The Tenant should be clear that if the Option is not exercised, the Landlord will be entitled to forfeit the Option Fee.

The User Note is intended for guidance only and does not in any way constitute legal advice and Users should treat it accordingly.

 


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Lease Option Agreement Template

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