What does 'lease purchase' mean in real estate?

A lease purchase in real estate refers to a transaction where a tenant leases a property with an agreement to purchase it at a later date, under agreed-upon terms. This arrangement typically involves the tenant paying an upfront fee or option payment for the right to buy the property. During the lease period, a portion of the monthly rent can often be applied toward the purchase price, which incentivizes the tenant to ultimately purchase the property. This structure benefits both the tenant, who has time to secure financing or improve their credit score before the purchase, and the seller, who has a committed potential buyer.

The other options do not accurately define lease purchase agreements. For example, while a lease may require the tenant to maintain the property, that is not a defining characteristic of lease purchase agreements specifically. Similarly, a rental contract being longer than usual describes a different type of leasing situation without the purchase intention. Lastly, a purchase agreement contingent on a lease does not capture the essence of a lease purchase, which combines leasing with an explicit intention and plan to buy the property.