How to do a Lease Option

What are the steps in selling a house via a Lease Option?

What type of documents do I need besides a Lease Option Agreement/Contract?

I’m in California.

Here is a link to a post here on Rei this should fill you in to give you some idea…
I dont know the laws in Cali. But i know l/o is illegal in Texas unless the property is free and clear. Maybe somone from your area can speak on it …

I don’t know about California but here in OH, I use essentially three forms:

  1. a basic lease agreement
  2. a basic purchase agreement
  3. an option agreement that you can draft up or get an attorney do one for you

The first two are straight-forward. The option agreement sort of ties the first two agreements together, much like the mortgage ties together the promisorry note to the deed of a house. Make sure you have the right clauses to nullify the option and purchase if they default on the lease.


I’m still confused as the necessary steps you take when using these forms. Let me give you a scenario. I have a property (free and clear) I want to sell via L/O. I have my T/B… I’ve done my credit check…he has the option fee. He’s the fella I want. Now in which order do the POA, Lease Agreement, and Option get signed by the T/B ?? In this scenario I’m assuming that the option is not recorded…correct ?

rkrim, are you talking about getting a house sub2 and then selling it l/o (a little different from) or doing a l/o and l/o to someone else? the first thing that you would need doing a l/o with the seller and selling it l/o to t/b would be a deposit receipt when you get it from your t/b. Then you would need the application telling you about their job, current and past residence ect. When you have checked them out and everything is good to go then get them other papers you mentioned signed. Maybe some one else can give you some more imput.

Ok…after further reading here it is !!

T/B is going to sign a

  1. Option to Purchase - option fee
  2. Lease - 12mos - 1st mos rent
  3. Purchase Agreement

All three docs are signed at the same time and tied together referencing each other. Would this option have to be recorded at the local court house? Or would it serve me better (the seller) not to have it recorded? It’s still basically a lease until the T/B exercising the option.

You may be making this a little more difficult than it really is. An option is a contract to make a contract (If the option is exercised then you make a purchase contract). The option must clearly show the price if the option is exercised. Time is considered to be of the essence in options - the option must be exercised within the time provided. Options usually include any agreed-on sales terms and provisions for escrow and delivery of title. Since an option is a contract there must be consideration passed. If the option to buy is part of a lease agreement, part of the rent would suffice as consideration for the option. Because there is consideration, the optionor cannot revoke the option after it has been given. Once the option is exercised you can worry about the purchase contract. It would be to the benefit of the person given the option to record it since that recordation would give him/her more legal rights and would give constructive notice of the option.

Im in California.

All you need is to have the T/B sign a purchase/sale agreement for your agreed price and a lease agreement tied to the purchase and sale agreement.

Thats it. No option agreement…

any questions let me know