What is a "lease option"?

A lease option is a specific type of agreement that combines a leasing arrangement with the potential for a purchase. It allows the tenant, or lessee, the right to buy the property at the end of the lease term, usually at a predetermined price. This type of contract is advantageous for tenants who may want to eventually own the property without making an immediate purchase.

The structure of a lease option can also benefit landlords, as it encourages tenants to take care of the property, knowing they have the option to buy it later. Throughout the lease period, the tenant has the flexibility to evaluate the property and the surrounding market conditions, helping them make an informed decision at the end of the term regarding the potential purchase.

The other options do not accurately reflect the nature of a lease option. While a rental agreement with an option for rent reduction, a contract for leasing commercial real estate, and agreements with variable lease payments may involve leasing terms, they do not provide the tenant with a right to purchase the property, which is the defining characteristic of a lease option.