What is the difference between a lease with option to purchase and an option to purchase?

Leases with option to purchase and options to purchase are both tools used in residential real estate law in Iowa. Leases with option to purchase are a type of lease under which an individual pays rent to a landlord and also has an option to purchase the property during the lease term or after the lease has expired. The tenant pays a premium to the landlord for this option, which is non-refundable, and is usually equal to one or two months’ rent. If the tenant chooses to exercise the option, they are required to purchase the property at a predetermined price. Options to purchase are similar to leases with option to purchase except that there is no rental agreement associated with an option to purchase. Generally, with an option to purchase, the tenant pays an option fee to the landlord, which is usually equal to one or two months’ rent. If the tenant chooses to exercise the option, they are required to purchase the property at a predetermined price. However, in contrast to a lease with option to purchase, if the tenant does not exercise the option, they do not get the option fee refunded.

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What is the difference between a lease with option to purchase and an option to purchase?

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