How Does Rent to Buy Work in South Africa
What is called “rent to buy” in South Africa?
A lease agreement called “rent to buy,” sometimes known as “rent to own,” calls for the renting of a property for a predetermined length of time with the option for the renter to acquire the property at the conclusion of that time.
What are the categories of rent to buy?
1. Lease option, where you have the choice to buy the house.
2. Lease purchase, where you are compelled by law to purchase the house at when the lease agreement expires.
How does rent to buy work in South Africa?
The standard practice is to pay an upfront option fee in addition to recurring option fees that are paid in addition to the monthly rental payments. These charges add up and are intended to help a prospective buyer accumulate a deposit that they may use if they decided to proceed with the purchase at the end of the leasing period. As a result, the buyer is left with a substantially lesser amount that must be paid on the agreed-upon property value. However, if the tenant decides not to go through with buying the property, the collected fees are forfeited.
Is rent-to-buy legal in South Africa?
Rent to buy is a legal lease arrangement endorsed by the South African government.
What are the benefits of rent to buy in South Africa?
1. Start-up costs are modest in comparison to more conventional methods of purchasing real estate.
2. There is no possibility of the house’s price rising by the time you are ready to buy because it is fixed and determined up front.
3. You have the option to buy the property throughout the term of your rent to buy arrangement.
4. You have the opportunity to test out the house and the neighborhood before deciding to buy it because you are not required to purchase the property when your lease expires.
What are the disadvantages of rent-to-own?
1. You might lose your down payment and other non-refundable charges if you don’t purchase the house in the end.
2. There are provisions that may impact your sole right to buy the house. For instance, your ability to buy the house can be revoked if you fall behind on your rent payments.
3. You might be required to buy the house or face legal sanctions.
