What is a real estate lease with the right to buy

23.05.2025

A lease with a buyout option is one of the most convenient financial instruments that can be used to become a homeowner without having to pay a large sum of money at once. This option is especially attractive for those who do not yet have the full amount to buy real estate or are unable to obtain a mortgage loan on favorable terms. In this article, we will look at what a lease with a buyout option is, how it works, how it differs from buying by installments, and other important nuances.

What is a lease with a buyout option and how does it work

According to the Civil Code of Ukraine (Article 810-1, part 2), lease of an apartment or house with a right to purchase is a special type of lease agreement under which the lessor (legal entity) transfers housing to the lessee (individual) for use for a certain long-term period for a fee with the right to purchase it later. In essence, this is the same as a long-term lease of real estate, but the monthly payment is included in the total cost of housing.

The lease term is specified in the agreement, but it cannot exceed 30 years. At the end of the term, upon payment of the residual value or in case of early payment of the entire cost, the tenant may take ownership of the property. Until the transfer of ownership occurs, the tenant is considered only a user of the property, not its owner.

You can register your place of residence in a rented apartment only with the consent of the legal owner. The landlord may also give consent to the redevelopment or reconstruction of the property.

The main differences between a lease with a buyout option and a conventional lease and purchase by installments

A lease with a buyout option combines the features of a conventional lease and an installment purchase, but it has key differences.

Differences between a lease with a buyout option and a regular lease:

Purpose. A regular lease provides only for the temporary use of the property without the right of ownership. In the case of a lease with a purchase option, the tenant gets the opportunity to buy the property in the future.
Payments. When renting a property with a purchase option, a portion of the monthly rent is credited as a contribution to a future purchase. In the case of a regular lease, the tenant simply pays the rent for the use of the property.
Obligations. A lease with a purchase option specifies the terms and conditions of when and how the tenant may become the owner of the property. A regular lease agreement does not.

Differences between a lease with a right of redemption and an installment purchase:

Ownership. When taking out an installment plan, the buyer immediately signs a purchase and sale agreement and becomes the owner of the property (with restrictions on the right to dispose of it until full payment is made). In a lease with a buyout, ownership is transferred only after all the terms of the contract are fulfilled.
Flexibility. A lease with a purchase option may provide for an option to refuse to buy, while an installment plan is an obligation to buy the real estate specified in the agreement.
Down payment. Installment leases often have a required down payment, while hire purchase leases may not or may be smaller.

Rent-to-own is an intermediate option for those who are not yet ready to make a full-fledged purchase, but who do not want to spend money only on rent.

Execution of a lease agreement with the right to purchase

A lease of housing with a right to purchase is evidenced only by a signed written agreement. The leased property may be an apartment or a part thereof, a residential building or a part thereof intended or suitable for permanent residence therein. The lease agreement is subject to mandatory notarization.

A lease agreement with a purchase option combines the features of a lease agreement and a real estate purchase and sale agreement. The more detailed the legal relationship between the tenant and the landlord, the fewer risks and disputes will arise. The purpose of the agreement should be to transfer ownership of the property to the tenant upon payment of the rent.

What must be specified in a lease agreement with a right of redemption

names of the parties;
characteristics of the leased property;
the term for which the agreement is signed;
amount, procedure of formation, form and terms of lease payments and terms of their revision;
grounds for early termination of the lease and the procedure for refunds;
formation of a reserve for unforeseen expenses related to servicing the lessee's obligations;
obligations and liabilities of the parties.

A lease agreement with a buyout option is terminated upon full payment of the lease payments within the specified period or ahead of schedule.

Risks of renting a home with a buyout option

Renting residential real estate with a buyout option can be a convenient option, but this format also carries certain risks that are important to consider before signing a contract.

What can be the dangers of a lease with a buyout option?

Unscrupulous landlord - the landlord may refuse to sell the property after the lease expires or try to change the terms, so it is important to carefully check the contract and consult a lawyer;
loss of accumulated funds - if the tenant fails to fulfill the terms of the lease, he or she may lose the amounts already paid, so it is important to make sure that the relevant clause is spelled out in the agreement in advance;
Increase in value - during the term of the lease agreement, the price of the property may increase, so it is important to fix the price in the agreement;
legal status of the property - the property may be encumbered, pledged or subject to litigation, so it is important to check the property in the State Register of Property Rights.

It should also be borne in mind that the rent for an apartment or house with a buyout option is often higher than the regular rent. In order not to violate the terms of the agreement, it is important to calculate in advance whether you will be able to pay the specified amounts each month.

The right to terminate a lease agreement with subsequent purchase

A lease agreement with a subsequent purchase can be terminated voluntarily or in court. If the agreement is terminated by mutual agreement of the parties, the refund of the paid funds is made in accordance with the terms of the signed agreement. The tenant is obliged to notify the landlord of the intention to terminate the agreement 3 months in advance in writing.

A lease agreement with a buyout can be terminated voluntarily and at the initiative of the landlord. But only if the tenant needs the apartment for his or her personal residence or for the residence of his or her family members. In this case, the landlord must give the tenant at least 2 months' notice.

A lease agreement with the right to purchase may also be terminated by a court decision at the request of the landlord in the following cases

the tenant has not paid the rent for 6 months, unless the agreement stipulates a longer period;
the tenant or other persons for whose actions the tenant is not responsible have destroyed or damaged the housing.

The tenant can also go to court to terminate the agreement if the other party does not fulfill the terms of the agreement. In any case, the decision to return the money is made by the court. If the lease agreement is terminated, the tenant must move out of the apartment without being provided with other housing.

Need help with real estate?Contact us!Reach out to Mayak Real Estate Agency for a professional consultation on buying, selling, renting, or investing in property.

Kateryna PestryakovaOffice manager

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