Residential Lease with Option to Purchase in Florida: Key Legal Considerations for Property Owners

DISCLAIMER: This blog post should not be construed as legal advice.

Residential lease agreements that include an option to purchase can be powerful tools for Florida property owners, particularly in higher-value transactions or unique market conditions. When structured correctly, they offer flexibility, income stability, and a potential exit strategy. When structured poorly, however, they can expose owners to unintended landlord-tenant disputes, statutory violations, or even claims that the transaction is an unenforceable installment sale.

This article highlights several key legal considerations Florida property owners should understand before entering into a residential lease with an option to purchase.

Lease and Option Must Be Treated as Separate Agreements

Under Florida law, a residential lease and an option to purchase should be clearly drafted as separate and independent agreements, even when contained in a single document. The lease governs possession and occupancy and is subject to Chapter 83, Florida Statutes, while the option governs the potential purchase of the property.

Proper drafting should make clear that:

• The tenant’s occupancy is based solely on the landlord-tenant relationship.

• The option is conditional and does not convey any ownership interest.

• A default under the lease may terminate the option, but exercising the option does not automatically extinguish the lease until closing occurs.

Failing to maintain this separation can lead to confusion over rights, remedies, and applicable law.

Be Careful How Large Upfront Payments Are Characterized

One of the most common and risky issues in lease-option agreements is the treatment of large upfront payments.

In Florida, a “security deposit” is strictly regulated by statute. If a payment is labeled a security deposit, it must follow statutory rules regarding holding, notice, claims, and refunds. A security deposit generally cannot be automatically forfeited, cannot function as liquidated damages, and should not double as non-refundable option consideration.

If a large payment is intended to be refundable if no purchase occurs, and be credited toward the purchase price if closing occurs, then it must be drafted very carefully to avoid statutory noncompliance or later disputes. In many cases, separating refundable security deposits from non-refundable option consideration (even nominal consideration) is the safest approach.

Landlord Maintenance Obligations Cannot Be Fully Shifted to Tenants

Florida law imposes non-waivable habitability and maintenance obligations on residential landlords, including responsibility for structural components and essential systems such as plumbing, heating, and air conditioning.

While lease-option agreements often contemplate tenants taking on greater responsibility for maintenance, especially when the tenant intends to purchase the property, those responsibilities must be structured so that:

• Statutory landlord duties are preserved,

• Tenant-paid repairs are voluntary or pre-approved, and

• Any reimbursement or credit mechanisms are clearly defined.

Attempting to contract away statutory duties can render portions of an agreement unenforceable and increase exposure to tenant claims.

Reimbursement and Repair Credits Must Be Clearly Defined

In lease-option arrangements, it is common for tenants to invest in repairs or improvements during the lease term. If reimbursement or credits are contemplated, the agreement should specify:

• What types of repairs qualify,

• Whether prior written approval is required,

• Documentation standards (paid invoices, lien releases),

• When reimbursement is due, and

• Whether reimbursement applies only if the option is not exercised, or instead through the closing statement if the purchase occurs.

  
  

Vague or informal arrangements are fertile ground for disputes at the end of the lease term.

Title, Risk of Loss, and Closing Provisions Still Matter Even with Confident Sellers

Even when a property owner is confident about title and insurance coverage, well-drafted option provisions should still address:

• Title insurance and cure periods,

• Casualty loss before closing,

• Allocation of insurance proceeds, and

• Termination rights if closing becomes impracticable.

These provisions protect both parties and reduce the likelihood that a rare but serious issue turns into litigation.

Lead-Based Paint and Disclosure Compliance Should Be Handled Carefully

Federal lead-based paint disclosure requirements generally apply to residential housing built before 1978. However, properties that were rebuilt or substantially renovated after that date can raise factual questions.

Rather than simply deleting disclosures, many owners benefit from carefully drafted representations confirming post-1978 construction while maintaining compliance and documentation. This approach minimizes risk without over-disclosing.

Entity Structure Should Be Considered Early

Finally, property owners entering lease-option arrangements, particularly for high-value residential properties, should evaluate whether the transaction should be held in an individual capacity, an existing LLC, or a newly formed special-purpose entity. Entity structure can affect liability exposure, financing, tax planning, and exit strategy.

Residential lease agreements with options to purchase can be effective tools in Florida, but they require careful drafting that balances business goals with statutory compliance. Issues involving security deposits, maintenance obligations, option consideration, and risk allocation are highly fact-specific and should be addressed proactively, before the agreement is signed.

If you are considering a lease with an option to purchase, working with counsel familiar with Florida landlord-tenant law and real estate transactions can help ensure the agreement protects your interests while remaining enforceable and compliant.

If you are buying or selling real estate in Florida, contact us today to ensure your transaction is secure, seamless, and legally protected. With the right title expertise, you can invest in Florida real estate with confidence.