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Commercial Rent to own Agreement

Last revision Last revision 01/31/2024
Formats FormatsWord and PDF
Size Size10 to 15 pages
4.4 - 5 votes
Fill out the template

Last revisionLast revision: 01/31/2024

FormatsAvailable formats: Word and PDF

SizeSize: 10 to 15 pages

Rating: 4.4 - 5 votes

Fill out the template

A Commercial Rent to Own Agreement is a document used for a potential buyer of a commercial property to enter into a rental lease agreement with the landlord with the intention of buying the property at the end of the lease.

A Commercial Rent to Own Agreement is very similar to a standard Commercial Lease Agreement, and includes much of the same information, such as due dates, property descriptions, and the length of the lease term. However, the Rent to Own Agreement also explains that the tenant will have an exclusive option to purchase the property and includes information about that arrangement. Though it arranges for the potential sale of the property at the termination of the lease, the parties to a Rent to Own Agreement are first and foremost a landlord and a tenant.

A Commercial Rent to Own Agreement is only to be used in situations where a commercial property being used for business purposes is being rented. In situations where the property is residential and the tenant will be living there, a Residential Rent to Own Agreement should be used.

There are advantages for both the landlord and the tenant in using a Rent to Own Agreement. The main advantage for the landlord is a quick influx of cash flow through long-term and steady guaranteed rent payments. Especially if a property has been difficult to sell in the past, this is often a more feasible way to sell a struggling property. Finally, rents received, in combination with extra fees paid in exchange for the option to purchase, are often considerably above the market average value of the property. For the tenant, if they are working on their credit or don't have enough money for a down payment upfront, a Rent to Own Agreement gives them time to improve their credit score, pay off outstanding debts, and make incremental payments towards a down payment. Further, since the sale price of the property is agreed on ahead of time, the potential buyer is protected from the home price rising and some equity will be earned by the time the lease has ended and they are ready to purchase.

Having a written lease is always important to reduce the likelihood of misunderstandings or disagreements between the tenant and the landlord regarding the rental arrangement. All of the parties' expectations and obligations are laid out and plain to see. Having a written agreement is particularly important for Rent to Own situations, as scams are a legitimate concern, and having a paper trail documenting the understanding between the parties leaves them both protected in case one of the parties tries to back out later on down the road.

How to use this document

This document includes all of the information necessary to create a thorough and comprehensive Commercial Rent to Own Agreement. This Agreement can be created by either the landlord or the tenant but its terms must be agreed to and signed by both parties. The document includes various options to tailor the Agreement to meet the parties' needs. The Agreement allows the Parties to specify the following important details that will guide their landlord/tenant relationship and potential buyer/seller relationship:

  • Name and contact information for both Parties, including the landlord, the tenant, and anyone who the landlord is allowing to managing the property, such as an assistant or property manager
  • Description of the type of property being leased and its location
  • Length of the lease, specific start and end dates, and whether and how the lease term may be renewed after the termination of the initial lease term
  • Amount of money that the tenant will pay for a security deposit, rent payments, and an optional fee that will be paid to secure the tenant's option to purchase
  • Responsibilities that must be fulfilled by each party under this Agreement, such as maintaining the property, paying for utilities, maintaining liability and property insurance, paying taxes, and using the property in an acceptable manner
  • Outline of the purchase arrangement dictating when and how the tenant will be permitted to purchase the property, how much they will be purchasing it for, and whether any portion of the rent paid during the lease will be applied to the final purchase price

After inputting the required information, the Agreement is printed out and signed by both Parties, and then kept on file by both Parties for the duration of the Agreement as well as for a reasonable period of time thereafter.

Applicable law

As with Commercial Lease Agreements, Rent to Own Agreements are primarily controlled by the laws of each individual state. A Commercial Rent to Own Agreement is a binding contract that will be upheld in a court of law in any state. When there is a written Agreement, courts generally uphold the terms of the Agreement. In contrast to many of the common and implied protections contained in a Residential Lease and the associated laws, these protection laws do not exist for Commercial Leases. Therefore, the Commercial Rent to Own Agreement itself must contain the entirety of the agreement and the terms that the parties agree to be bound by.

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