Benefits for landlords

Lease option agreements can appeal to sellers too. They are best suited to buy-to-let landlords who own a number of properties they may wish to sell in a few years time. Sellers who need an immediate sale to buy another home (i.e. those in a chain) are better off sticking to the open market.

Unreliable tenants who don't care for a property are a landlord's worst nightmare. Think wine-stained carpets, blocked sinks and car tyres in the garden. Those on longer leases in properties they're looking to own are unlikely to fall into this category. Longer rental periods also allow landlords to avoid costly gaps between tenancies when a property lies empty.

The lease option offers some protection against the value of a property going down. However, the seller has the inverse risk to the buyer. If house prices rocket during the rental period then a property could end up being sold for much less than it could make on the open market.

Like any contract, the exact terms of a lease option can vary. One variation offered by the company Rent-2-Buy, offers tenants a six-year lease and gives them full responsibility for maintenance and repairs. Tenants are then given a 6% share of any increased value on an annual basis, effectively saving for a deposit as they rent. Signing an 'Option to Purchase' at the onset of the tenancy gives tenants the right to buy between the end of the third and sixth year, at a price knocked down by up to 36% of the growth in value (6% per year for six years).

Rent-2-Buy agreement

In a Rent-2-Buy agreement, a property worth £100,000 could rise in value to £150,000 in three years. The renter-buyer could earn an 18% rebate on the £50,000 value rise, and therefore be offered purchase of the property for a tempting £141,000.

The Rent-2-Buy contract does give the landlord the right to sell early and cancel the tenant's option, but this tends to be in exceptional circumstances and tenants are financially compensated. Equally, if the tenant's situation changes any time after the first six months of renting, they can give one month's notice and forfeit their option to buy. With the landlord's agreement, they can also pass on their tenancy and option to another tenant.

As with any property purchase, a lease option carries some risk for buyers and sellers alike. But with perks on both side of the deal, this new form of tenancy could prove a refreshing alternative to traditional property agreements in the UK.