A lease purchase contract (or lease option contract) is the abbreviated form of the appropriate term lease with option to purchase contract.
It is a form of real estate purchase which combines elements of a traditional rental agreement with an exclusive option of right of first refusal to later purchase the home. Lease purchase contracts are commonly used where a buyer wants to purchase a home, but due to credit issues would not qualify for a conventional mortgage and does not wish to, or would not qualify, for FHA or VA financing. Under a Lease Purchase Agreement, however, title to the real property remains vested in the seller until the property is completely paid off; as a consequence, if the purchaser/tenant defaults, he or she may be evicted as though under a more traditional lease. Georgia law frowns on many forms of Lease Purchase Agreements, and, as a consequence, a poorly drafted Agreement may be treated as an Equitable Mortgage, under which the title is treated as having vested in the purchaser / tenant, and the seller is treated as merely having a security interest in the real property in question and must foreclose in the event of default. Therefore, it is important to properly structure the transaction to avoid unintended consequences.