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California Rent-to-Own (Lease Option) Agreement

A California rent-to-own agreement is a combined lease and proposed purchase agreement for residential property that is signed by a property owner and a potential buyer. Under the contract, the buyer/tenant agrees to pay monthly rent for an agreed-upon term with the option to buy the residence before or at the end of the rental period. Due to the fact that the tenant will likely purchase the leased space, they will often be solely responsible for upkeep and repairs while they are renting.  By entering into a lease-option arrangement, interested buyers can improve their chances of being approved for a mortgage during the rental period by raising their credit and ameliorating their financial situation.

Rental Laws Civil Code – Division 3, Part 4, Title 5, Chapter 2 (Hiring of Real Property)

Purchase Agreement Laws Civil Code – Division 2, Part 4 (Acquisition of Property)

Related Forms

Disclosures

Lead-Based Paint Disclosure – Must be signed by both the lessor and the lessee if the rental unit was constructed before 1978.

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AB 1482 Just Cause Addendum (CIV 1946.2(e)(8)(B)(i) & 1947.12(d)(5)(B)(i)) – If the property is not subject to rent limits and just cause requirements mentioned in the state statutes, then the landlord must provide this form to the tenant.

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Bedbug Infestations (CIV Code § 1954.603) – Landlords must provide information regarding the management and prevention of bed bugs to tenants.

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Flood (GOV Code § 8589.45) – Landlords must provide written notice if the rental unit is located in a flood hazard area.

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Toxic Mold (HSC Code § 26147) – If the landlord has any knowledge of mold present in the dwelling or building, then written notice must be provided to tenants.

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Smoking Policy (CIV Code § 1947.5) – Every lease agreement must inform tenants of all prohibited smoking areas.

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Just Cause (§ 1946.2(f)(3)) – The Landlord is required to provide the following notification or lease provision to the Tenant unless the real property meets certain requirements in § 1946.2(f)(3) of the California Civil Code:

California law limits the amount your rent can be increased. See Section 1947.12 of the Civil Code for more information. California law also provides that after all of the tenants have continuously and lawfully occupied the property for 12 months or more or at least one of the tenants has continuously and lawfully occupied the property for 24 months or more, a landlord must provide a statement of cause in any notice to terminate a tenancy. See Section 1946.2 of the Civil Code for more information.


Demolition (CIV Code § 1940.6) – If the landlord has applied for a permit to demolish a residential unit, then any prospective tenants must be informed.


Megan’s Law (CIV Code § 2079.10a(a)(3)) – Every lease agreement must include certain language stated in the state statutes regarding sex offenders located in the area of the rental unit.


Methamphetamine Contamination Disclosure (CIV Code § 25400.28(b)) – A copy of a remediation order must be given to new tenants if the dwelling was been considered contaminated with methamphetamines and is subject to remediation.


Ordnance Locations (CIV Code § 1940.17(b)) – If the rental unit is located near a location that was used as a state or federal ordnance location, then new tenants must be notified.


Pest Control (CIV Code § 1940.8) – A notice from a pest control company must be given to new tenants if landlords have been using pest control services periodically.


Shared Utilities (CIV Code § 1940.9) – If tenants are sharing an electrical or gas meter, then landlords must disclose how these costs are split amongst the different renters.