In a highly competitive real estate environment that fluctuates with supply and demand, homeownership can be quite an adventure!
That said, several avenues can allow you to become an owner, including renting with an option to purchase. However, this solution can be complex and not suitable for everyone, as highlighted by the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ).
By reading this article, you will discover the advantages and disadvantages of such an option, including the obligations and risks for each of the parties involved. You will also see how I can, as a real estate broker, help you analyze the different possible scenarios in order to make your dream come true in the best possible conditions.
What is rent to own?
Renting a condo or a house with a view to purchasing it is a particularly interesting solution for future buyers who are not eligible for a traditional mortgage or who do not have the necessary down payment. As a real estate broker, I can help you find properties with this option.
In some cases, obtaining a mortgage loan can be difficult, particularly because…
- The financial situation of the buyer
- Rules relating to mortgage financing
- The condition of the building
By choosing to rent with an option to buy, the tenant signs a lease stipulating that he has the possibility – but not the obligation – to buy the condo or house at the end of the rental period. As a real estate broker, I can help you understand the conditions of this lease and negotiate the terms that suit you.
The promise of rental with option to purchase and the concern:
two concepts not to be confused Renting with an option to purchase concerns the rental of a building. In this case, the tenant undertakes to rent the property, while having the possibility of acquiring it at the very end of the lease, according to previously established conditions. This is the situation that this article deals with. As a real estate broker I am able to help you understand the differences between rent to own and other purchase options.
The concern, for its part, arises in the context of the sale of a building. In this case, the future buyer undertakes to acquire the property by means of a promise to purchase, but he wishes to occupy the premises before signing the deed of sale.
Generally speaking, renting with an option to purchase is advantageous for a tenant-buyer who wishes to improve his credit since the amounts paid in the form of rent will constitute his down payment. This option also allows him to define certain acquisition conditions such as the price and the obligations provided for in the lease.
On the other hand, rent-to-own allows the seller to find a tenant willing to maintain the unit or building in good condition, while obtaining rental income.
That being said, three different scenarios can be considered:
- Sign a residential rental promise by which a person undertakes to rent the premises while providing a condition allowing them to purchase the property within a specified period.
- Include a right of preference by which the owner can leave his building for sale while still offering priority to the tenant over other potential buyers. This scenario allows the tenant to purchase the property by fulfilling a promise to purchase, as in the previous situation.
- Present a residential rental promise and a purchase promise at the same time. In addition to defining the terms of the rental, this way of doing things specifies the conditions of sale, such as obtaining financing, the pre-purchase inspection and the date of signing the deed of sale, for example.
A rental with option to purchase implies obligations for each party; these differ depending on the time of the transaction. Thus, throughout the duration of the lease, the tenant-buyer has the same rights and obligations as those provided for in the Civil Code of Quebec. Once the property is purchased, the rules relating to the sale of a building prevail. In addition, very distinct risks exist for each of the two parties.
On the one hand, the tenant-buyer risks losing the sums paid as rent if he does not exercise his purchase option or if the building is sold to another person. On the other hand, the owner must honor the tenant’s right to remain in the premises if the sale does not go through and look into certain tax considerations, such as capital gains.
Contrary to what many people might think, a real estate broker remains a valuable ally, even for a rental with option to purchase project. Framed by the Real Estate Brokerage Act, it will diligently fulfill its duties of verification, information and advice, exactly as it would for any other real estate transaction.
Thanks to my experience in the field and my in-depth expertise, I will be able to advise you on many aspects, including:
- The duration of the lease
- Rental conditions
- The deadline before which to confirm the purchase option
- The sale price
- Inclusions and exclusions
In short, a real estate broker can play a key role in a rental with option to purchase project by offering tailored support and providing informed advice throughout the process. It can help you avoid the pitfalls and risks associated with this purchasing formula, while providing you with the peace of mind necessary so that you can make an informed decision.
If you are looking for a competent and experienced real estate broker on the south shore, do not hesitate to call me, I will be happy to help you realize your rental project with option to purchase, whether for a house on the South Shore, a condo on the South Shore or any other type of property in the area.
