A Chandelease is a unique renting contract where you can rent a property while simultaneously having the opportunity to buy in the near future. This is a helpful option for people who want to live in a property, but aren’t ready to pay for the home. This situation is also beneficial for property owners since renting out the home offers stability while maintaining the property’s long term value.
In other words, a Chandelease is a contract where a renter is able to lease a property but also has the option to buy the property in the near future for a previously negotiated price.
How Does A Chandelease Work?
In a Chandelease, a renter is permitted to:
- Rent a residential (and sometimes commercial) unit
- Secure a future purchase of the unit at a price agreed upon before renting
While renting the unit, the renter will live in the unit as they would in a normal lease. However, in this case, the renter has the option to buy the unit at the end of their lease, or during a set period of time. This helps the renter to avoid a future price rise on the home, while also allowing the owner to be assured that their home will have a future sale.
Still, a Chandelease has certain cornerstone elements
1. Fixed Purchase Price
Having a Purchase Price that is fixed is also a great advantage. The renter is able to have a profit, as they will be able to purchase the property at that defined price of the contract, due to the pre-signed contract.
2. Lease Period
The lease also has a defined lease period that typically ranges from 1 to 5 years. The renter is entitled to occupy the property as long as they are paying monthly.
3. Purchase Option
The renter has the purchase obligation option to buy the property, but if they don’t feel like they want to buy they can just leave the lease at the end of the lease term.
4. Rent Credits
In some Chandelease agreements, a portion of the rent is transferable to the payment of the purchase price, if the purchase is to occur. In effect, the renter is able to purchase equity ~small part of property.
Benefits for Renters
A Chandelease is particularly favorable to the renters that have a long term plan. A Chandelease also gives the renters:
- Prolonged Time to prepare finances while living in the property
- Protection from price surges in the property market
- Opportunity to evaluate the house and the surrounding area thoroughly before they are in a bind to buy the property
- A definite plan of attaining the property without needing to have a mortgage done at the onset.
First time buyers, Freelancers, and those trying to restore their credit will see great advantage on this.
Advantages of Property Owners
Most importantly, property owners also get the benefits of a Chandelease agreement:
- Assured rental income
- Decreased chances of vacancy
- Increased chances of selling the property
- Tenants tend to take better care of the property
Because renters silver the property as a future home, the upkeep and maintenance are often better than with regular rentals of the property
Residential v/s Commercial Chandelease
Most of the times, Chandeleases are used in residential real estate, however, they are also able to apply to commercial real estate as well. For commercial properties, businesses might lease a space with the purpose of buying the space after their earnings are stable.
Both of the models follow the same key principle. Rent now and buy later at a determined price.
Things to be determined
Before getting into a Chandelease, both of the parties have to finalize the details stated in the agreement:
- Legal terms and conditions and exit strategies
- What are the consequences if the renter decides to not purchase the property
- Responsibilities of maintenance and repairs
- Market risks if property values decrease
It is highly advised to have a real estate or legal professional skip the transaction to be fair and transparent.
Frequently Asked Questions
Q1. What encompasses the term Chandelease?
A: A Chandelease is a contract whereby a potential buyer enters into a property lease agreement, with the option to buy the property at a predetermined price.
Q2. What advantages does a Chandelease offer to the leaseholder?
A: If a leaseholder locks in the predetermined price, they will be able to occupy the property, as well as build equity, while working on the financial arrangements to make the buy.
Q3. Are there any limitations to using Chandelease on commercial property?
A: Chandelease agreements can be applied to residential as well as commercial property, thus enabling tenants to first rent a place, and subsequently purchase it.
Q4. What transpires when a renter does not opt to purchase the property?
A: Should the renter decide to not purchase the property, they will be able to vacate the property and conclude the lease as they normally would. Depending on the contract, option fees or rent credits may be lost.
Q5. Are there any legal obligations when it comes to a Chandelease?
A: There is a presumption that a Chandelease does create legal obligations. This is a non-verbal contractual agreement, and it is advisable that both sides examine the conditions of the contract and obtain legal counsel before entering into a contract.
Conclusion
Chandelease is an innovative and flexible way to create a solution to the gap that exists between renting and owning a property. This approach offers the resident an opportunity to occupy the premises while facilitating a purchase, with a predetermined price, over a determined period of time.
For anyone desiring their own housing control, a well structured Chandelease provides opportunity without the immediate pressure of ownership.
