How is a lease option created?

A lease option is created through the inclusion of a purchase provision in the lease agreement. This provision grants the tenant the right, but not the obligation, to purchase the property at a predetermined price within a specified timeframe. This arrangement allows the tenant to secure the option to buy while initially leasing the property, providing flexibility and an opportunity to test the property before making a purchase commitment.

The importance of having this provision clearly articulated in the lease cannot be overstated, as it outlines the terms under which the tenant can exercise their option to buy. This differentiates a lease option from a lease agreement without a purchase clause, where the tenant does not have any right to purchase the property.

Creating a lease option necessitates that the parties agree on property negotiation terms and price; however, mere agreement is not sufficient to create an enforceable lease option unless that agreement is formalized within the lease itself.

Actions such as registering the lease with local authorities or notarizing it may have their places in the property law context—such as ensuring public notice or establishing validity—but they do not inherently establish the lease option itself. The viability of the lease option hinges primarily on the inclusion of the purchase provision in the lease agreement.