What is a lease option?

A lease option refers to an agreement between a landlord and a tenant that provides the tenant with the right, but not the obligation, to purchase the rental property at a predetermined price within a specified timeframe. This arrangement typically includes a rental agreement and an option fee that secures the tenant’s right to buy the property later.

The significance of a lease option lies in its potential to benefit both parties: the tenant has the opportunity to invest in a property while renting, and the landlord may secure a buyer in the future. By establishing the purchase price upfront, the tenant can avoid fluctuations in the real estate market and plan their financial future accordingly.

Understanding this definition clarifies why this choice is the correct answer. It encapsulates the essence of a lease option, distinguishing it from other rental agreements or lease modifications that do not confer a purchase right.