Which statement best describes a lease with option to purchase?

Which statement best describes a lease with option to purchase?

• A. A lease agreement that grants the tenant the right to buy the property under defined terms during or after the lease.
• B. A standard rental agreement with a fixed term and no purchase option.
• C. A mortgage instrument that transfers title at closing.
• D. A lease arrangement that requires the tenant to purchase at a set price only after the lease ends.

Answer: (A)

A lease with an option to purchase is a rent-to-own arrangement where the tenant gains the right, but not the obligation, to buy the property under terms defined in the agreement, and this right can be exercised during the lease or after it ends. This setup includes specifics like the purchase price and timing being set or determinable, and often an option fee or credits that may count toward the purchase price. The key idea is that ownership transfer happens later, at closing, if the option is exercised, while the tenant continues to lease in the meantime. The landlord remains the owner until the purchase is completed, and the option itself creates a potential future path to ownership rather than immediate transfer. The other descriptions don’t fit because one describes a plain lease with no purchase option, another describes a mortgage instrument that transfers title at closing, and the last describes a lease that mandates purchase after the term, which is not an option but a mandatory obligation.

A lease with an option to purchase is a rent-to-own arrangement where the tenant gains the right, but not the obligation, to buy the property under terms defined in the agreement, and this right can be exercised during the lease or after it ends. This setup includes specifics like the purchase price and timing being set or determinable, and often an option fee or credits that may count toward the purchase price. The key idea is that ownership transfer happens later, at closing, if the option is exercised, while the tenant continues to lease in the meantime. The landlord remains the owner until the purchase is completed, and the option itself creates a potential future path to ownership rather than immediate transfer.

The other descriptions don’t fit because one describes a plain lease with no purchase option, another describes a mortgage instrument that transfers title at closing, and the last describes a lease that mandates purchase after the term, which is not an option but a mandatory obligation.