A lease-option agreement is a popular alternative to the traditional purchase and sale of real property. The agreement typically includes components of a lease, with an option for the tenant to later purchase the property. The tenant sometimes pays an upfront “option fee” towards the purchase price. During the lease term, title to the property remains with the landlord until the tenant exercises its option and pays the balance of the purchase price. When the tenant properly exercises its option, the landlord becomes obligated to sell the property to the tenant.

There are serious issues to consider when using “rent-to-own” contracts. For example, if a default or breach occurs, landlords often think that evicting the tenant is a proper remedy. However, eviction may be improper if the tenant has acquired equitable title, or the right to attain ownership of the property. In Florida, if a tenant develops an equitable interest, the agreement could be treated as a mortgage and subject to the rules of foreclosure (rather than a basic eviction).

Notably, section 697.01(1) of the Florida Statutes provides that:

“All conveyances, obligations conditioned or defeasible, bills of sale or other instruments of writing conveying or selling property, either real or personal, for the purpose or with the intention of securing the payment of money, whether such instrument be from the debtor to the creditor or from the debtor to some third person in trust for the creditor, shall be deemed and held mortgages, and shall be subject to the same rules of foreclosure and to the same regulations, restraints and forms as are prescribed in relation to mortgages.”

Additionally, under section 83.42(2), the Florida Residential Landlord and Tenant Act does not apply to:

“Occupancy under a contract of sale of a dwelling unit or the property of which it is a part in which the buyer has paid at least 12 months' rent or in which the buyer has paid at least 1 month's rent and a deposit of at least 5 percent of the purchase price of the property.”

It all comes down to the terms of your lease-option agreement, and the payments made by the tenant. When title is disputed, a landlord must show that the tenant did not satisfy the statutory requirements for exclusion from the eviction process.

Moral of the story: think twice before using any type of lease-purchase agreement. Whether you're considering an option contract or need to proceed with eviction, you should consult with competent legal counsel to protect your best interests.