Rent with Purchase Option: How Does It Work?

The difficulty in accessing credit and the economic and employment situation mean that many people who, initially, would opt for the purchase of a property end up living off the rented property in Noida. For many of them, the rent with option to purchase is an increasingly common departure, since it allows to invest the money destined to the rent to a possible purchase. But, what does it consist of and how does it work?

What does it consist of?

The rented property in Gurgaon with the right to purchase is a double or mixed contract, consisting of two subcontracts, one for rent and one for sale. This allows the tenant to live leased in the house for a specific period, after which he will be entitled to buy it for an agreed price which will be deducted, totally or partially, the rental income paid up to the moment.

It is a type of contract that can be beneficial for both parties: for the tenant because he can live on rent while investing in a possible purchase; for the landlord, for his part, because, while the tenant does not buy, he has his house for rent with the premium as insurance.

This type of agreements do not have to mean a rental fee more or less than a normal contract, but it does imply a greater initial outlay when having to provide a premium for the purchase option, which is usually much greater than the amount contributed on a bond. Also, 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 home, he will lose the whole 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 opt for a loan. Likewise, if it is clear that this is the most appropriate option, before making or signing the contract, it must be verified that the home is free of charge.

How should the contract be?

For it to be valid and, according to the Supreme Court, it is mandatory that, at least, stipulated in it two essential conditions of the sale: the object of the contract and the price.

That is, the decision to acquire the dwelling is given to the tenant after the marked rent years and the stipulated sale price for the dwelling at the time of signing the contract, the amount of the rental installments and the percentage to be deducted from the rent. Rental rent, in case the sale is made. If an initial premium is provided, which is usual, the agreed amount must also appear.

Be that as it may, 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 as a purchase.

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