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Alabama Rent-to-Own (Lease Option) Agreement

An Alabama rent-to-own agreement is a form used by homeowners for renting-out their property to tenants, who will have the option of purchasing the home if they so choose. The agreement effectively combines a lease agreement with a purchase agreement, allowing the parties to negotiate a rent amount, the term of the lease, the purchase price of the home, and other conditions.

The form is also known as a “lease-option” or “rent-to-own”, and is commonly used in situations where the tenant(s) are unable to purchase a home due to financial issues. This can include an inability to acquire a home loan or the lack of savings necessary for making a down payment. The hope is that by initially leasing the property, the tenant(s) can use the time to improve their financial standing. Then, one (1) to several years later, they will be able to afford to purchase the rental property prior to the end of the option term.

It’s important to understand that the tenant(s) have the option of purchasing – they can treat the property as a normal rental if they so choose. However, this is not recommended due to the agreement often requiring tenant(s) to pay increased rent (a portion of which contributes towards the purchase price), pay an option fee, and take the burden of all utilities and home maintenance.

Lease Laws – Title 35, Chapter 9A

Purchase Agreement Laws (§ 6-9-142) – Alabama is what is known as “caveat emptor”, which, when translated from Latin, is “let the buyer beware”. This means it is on the buyer (tenant) to discover issues with the property. In other words, the seller is not obligated to disclose issues with the home.

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