Option to buy clause offers real benefits to tenants

Tenants should seriously consider putting an option to buy clause into their rental agreements, the property experts say.

Gerhard Kotzé, CEO of the ERA South Africa property group, says the suggestion makes considerable sense when a tenant aspires to ownership of the flat, townhouse or cluster unit he is leasing, but is unable to afford it right now.

“Notwithstanding the raft of bad economic news still coming our way, there are signs that the Reserve Bank will begin easing interest rates next year, perhaps before the general election, and many potential home owners would then do well to acquire the property they currently rent.

“That is of course assuming they like the property enough to buy it, and that the landlord is willing to insert an option to buy clause into the lease agreement.”

There is also the question, he says, of how the selling price would be arrived at, with the first prize for the tenant being a price set at a reasonable premium over the current ruling price for a similar property, on the assumption that by the time the buying option is exercised, the value of the property will have increased.

“Conversely the clause may indicate the price is negotiable at the time of purchase, based on the prevailing market levels, but even here the tenant benefits in having first option on the property.”

The key in this scenario, says Kotzé, is affordability. “If the tenant knows he has a certain amount of time to assemble a deposit and generally what that deposit will have to be, it becomes possible to plan his finances accordingly and prepare for home ownership.”

Article from: www.era.co.za