What does the term "lease option" mean in real estate leasing?

The term "lease option" in real estate leasing refers to a tenant's right to purchase the property at a later date under specified terms. This arrangement is beneficial for both parties: the tenant has the opportunity to secure a property they may wish to buy in the future, often locking in a purchase price at the time the lease is signed. This can be advantageous in a rising real estate market. The landlord, on the other hand, is potentially securing a future buyer while generating rental income.

This arrangement typically outlines specific terms regarding the purchase, including the price and time frame within which the tenant can exercise the option to buy. It provides flexibility for the tenant and can provide a path to ownership without the immediate need for full financing. The other options do not accurately represent the nature of a lease option, as they pertain to other aspects of leasing agreements, such as rent adjustments, tenant subleasing rights, or lease termination conditions.