How a Lease and Option Transaction Works

Here is a step-by-step outline of the mechanics of a lease and option transaction:

Step 1: The lessee (tenant) agrees to lease a property from the owner (lessor).

Step 2: The lessee buys a real estate option from the lessor to purchase the property under lease.

FORM 5.1 Sample Memorandum of Lease Agreement

This memorandum of lease agreement made this ninth day of July 2005, is for the purpose of recording and giving notice of a lease agreement made between David D. Jones, known hereinafter as the Lessor, and Donald S. Reed, known hereinafter as the Lessee, in which Lessor agrees to lease to Lessee that certain real property known as 45735 Hillsborough Avenue, Tampa, Florida 33603, and legally described as: Lots 47, 48 and 49 of Carter's subdivision according to map or plat thereof as recorded in plat book 69, page 89, of the public records of Hillsborough County, Florida, which was executed between the Lessor and Lessee on the ninth day of July 2005 and which will expire at twelve o'clock midnight on the eighth day of July 2006.

IN WITNESS WHEREOF, Lessor and Lessee have set their hands the date aforesaid

David D. Jones Donald S. Reed

Lessor Lessee

Copyright Thomas J. Lucier 2005. To customize this document, download it to your hard drive from Thomas J. Lucier's web site at The document can then be opened, edited, and printed using Microsoft Word or another popular word processing application.

Step 3: The real estate option grants the lessee-optionee the exclusive, unrestricted, and irrevocable right and option to purchase the property under lease at a fixed purchase price during the option period.

Step 4: The lessee-optionee can assign or exercise the real estate option or let it expire.

Step 5: Once exercised, the real estate option agreement turns into a bilateral purchase agreement, in which the lessee-optionee becomes buyer and lessor-optionor, the seller.

Step 6: The seller transfers the property's title to the buyer when the transaction is closed.

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