The rent to own option is a formula that allows the tenant to rent a house for an agreed time, after that time, the tenant has the right to buy that house by discounting part of the price for the rents he has paid previously.
How to make a rental contract with an option to purchase in Spain
The rent with the right to purchase option works with a contract that integrates two subcontracts. The rental contract that works as a normal rental with the only difference in that it is agreed that the rents paid until the moment of purchase are discounted from the price and in what proportion. The rent to purchase option has no legal restrictions therefore it’s important to specify them in the contract.
The requirements that must be included in the rent to own contract in Spain
The agreement between the parties in which a party agrees to sell the property to another with an option to buy must include:
- Price at which the purchase can be made.
- Term in which the tenant can exercise his right to buy with a maximum of 5 years. If there is an extension of the lease, the new contract does not redirect the purchase option from the old to the new one by extending the initial plan.
- If there is a fee for exercising the purchase option
- The time that the tenant can remain renting the property
- The monthly rent of the property and who will take care of the community expenses or possible reforms that are necessary to carry out.
Advantages of rent with option to purchase in Spain
- The money paid for the rent will be used to pay part of the house. This way you can enjoy the house while saving to pay it.
- When the tenant goes to the bank for a mortgage, the bank “will appreciate” that the tenant has already been “paying the mortgage”.
- The tenant decides when he wants to buy the apartment and can wait until it suits him to make the purchase.
- The owner receives a month-to-month monthly payment and can benefit from tax benefits for renting. You can even protect yourself against defaults with a clause stating that if the tenant is late on payments, he loses the option to purchase.
Disadvantages of rent with option to purchase in Spain
- The owner does not receive the entire amount of money from the beginning nor can he sell it to third parties.
- The sale price is frozen in the option, so if after the deadline, the tenant decides not to buy, the owner must adapt the price of the house to the current market value, on the other hand, the tenant cannot benefit from a possible fall in prices, during the term of the contract.
- Tenant may be paying a higher rent because they have the option to buy.
Renting to own is a good intermediate solution for foreigners arriving to Spain to settle. If you have recently arrived and you want to buy a home in Spain but you need to first get your work or business income settled, you could consider this as a good option. Many home sellers in Spain may consider renting to own if you ask them for that option, even though they don’t advertise it.