How does the rental with purchase option work?
The difficulty in accessing credit and the current economic and employment situation mean that many people who planned to buy a property end up living on rent. And it is that for many of them the rent with option to buy is an increasingly common exit, since it allows to invest the money destined to the rent to a possible purchase. But what exactly is it and how does it work?
What is the rent with option to purchase?
The rental with the right to purchase
is a double or mixed contract consisting of two subcontracts, one for rent and the other for sale. This modality allows the tenant to live leased in the house for a certain time. At the end of the term, you will have the right to buy it for an agreed price and from which the rental income paid so far will be deducted.
According to the Supreme Court, it is "a pre-contract - in principle unilateral -, under which, one party grants the other the exclusive power to decide on the conclusion or not of the main contract of sale, which must be carried out within a certain period of time and under certain conditions, and may also be accompanied by the payment of a premium by the opting party » .
It is, therefore, a type of contract that can be beneficial for both parties
: for the lessee because he can live on rent while investing in a possible purchase; for the landlord because, while the tenant does not buy, he has his rental home with the premium as insurance.
These types of agreements do not have to mean a higher or lower rental fee than in a normal contract, but it does imply a higher initial disbursement by having to contribute a premium for the option to purchase, which is usually much greater than the amount provided in a bond. In addition, in the case of the premium and contrary to what happens with the bonds, if in the end the tenant does not decide on the purchase of the house, he would lose all of it.
For this reason, it is very important to ensure that, when the time comes, you will be able to pay the purchase price or qualify for a loan. Likewise, if it is clear that this is the most appropriate option, before making or signing the contract you must verify that the house is free of charge.
How should the rental contract with option to purchase be?
The rent with purchase option is an atypical contract, not contemplated by the Law and that is not expressly regulated in the Civil Code, although it is accepted and recognized in the Mortgage Regulations and the Urban Leases Law (LAU). For this reason, it is very important that all conditions are very well specified in the contract.
For this to be in force and according to the Supreme Court, it is mandatory that, at least, two essential conditions of the sale are stipulated therein: the object of the contract and the price. This means that the decision of acquire the property from the tenant after the marked years of rent and the stipulated sale price for the residence at the time of signing the contract, in addition to the amount of the rental fees and the percentage to be deducted from the lease rent in case of that the sale is made. If an initial premium is provided, which is usual, the agreed amount of it must also appear.
Since it is a double contract, it is convenient that it clearly reflects all the conditions related to the lease and purchase. In this sense, these are the data that should be included in both the rental agreement and the sale contract:
Purchase and sale contract
- Term during which the tenant can be leased in the home
- Term during which the tenant can exercise his right to the Purchase
- Amount of the monthly rental income
- Who is responsible for the expenses of the community or of a possible reform
Rental conditions with option to purchase
- The will of the lessor will sell the property to the lessee if he is interested in his purchase.
- Sale price of the house.
- Percentage (fixed or variable by years) of the rental fees made until the time of purchase to be deducted from the sale price.
- Amount of the initial premium contributed by the lessee (if any) for the right to purchase, normally set based on a percentage of the agreed sale price
- At the time of making the contract, it is not essential to set an initial premium for the right to the option to purchase. However, it is advisable for the landlord, as it is a way to ensure that the tenant is interested in acquiring the home. It should be clear that the premium and the fees invested in the rent will be lost if, when the time comes, the tenant does not exercise the option to purchase.
- The tenant has the right to remain leased in the house during the years that the rental contract lasts, whatever the term established to exercise the right to purchase, since this subcontract is regulated by the LAU.
- The tenant can extend, if the owner so consents, the rental contract, but, in that case, the purchase option will expire because it is two different contracts.
- The owner has the obligation to keep the contract and not assign, rent or sell the apartment to third parties for the duration East.
- The tenant has exclusivity in the purchase of the home within the term established in the contract to exercise their right to the option.
- The purchase of the home can take place long before the deadline. In fact, it is usual for the tenant to decide on the purchase before two years, which is beneficial for both parties: the tenant does not suffer much fluctuation in prices and the owner manages to get rid of the house.
- The price of the sale cannot be modified by owner or by tenant. The rental price, however, can vary depending on the CPI if the owner demands it.
- If the tenant is late in paying the rent more than two months he will lose the option to buy and, therefore, the premium paid.
- The contract can be registered in the property registry to be enforceable to third parties, as long as both parties agree and meet the basic requirements (as specified the purchase price, the premium price and the term to exercise the option).
- Being subject to the Onerosa Property Transfer Tax, these contracts may give rise to different tax situations:
- If only the term and the price of the house is specified, during the lease, the tenant may deduct the rent and the landlord must declare the perceived by this. In addition, when the sale is made, the owner will have to declare that capital gain and, if applicable, the buyer deduct it.
- If the tenant pays the owner the premium for the right of the option, the latter must declare that gain, although the former cannot deduct it.
Be that as it may, it is important to keep in mind that the price of the purchase option and the part of the rents that are deducted from the final price when the purchase option is exercised, can be deducted in the IRPF for the acquisition of habitual purchase.