Lease-purchase

A lease-purchase combines a right to occupy property as a tenant with a binding agreement to purchase under stated terms. During the lease phase, rent and landlord-tenant duties apply. The purchase provisions identify price, closing, financing, title, credits, conditions, and default. The label is not decisive, so the complete agreement must show whether purchase is mandatory or optional.

A true lease-purchase obligates the tenant-buyer to buy and the owner-seller to sell if stated conditions are met. A lease-option gives the tenant a choice to purchase and ordinarily imposes no purchase duty unless the option is validly exercised. Once exercised according to its exact terms, an option can create a binding purchase contract.

No. Illinois courts and statutes look at substance rather than the marketing label. A document called rent-to-own can function as an installment sale if the seller agrees to sell, the buyer agrees to buy, payments are applied toward the price over the required period, and the seller retains an interest or security. A genuine lease-option can remain a lease until the option is exercised.

The Act defines a covered installment sale as a sale of residential real estate where consideration is payable in installments for at least one year after the date of sale and the seller retains an interest or security in the property. Its defined seller generally enters more than three such contracts during a 12-month period. A lease-purchase meeting the substance of those definitions may trigger the Act despite its title.

Yes. For a transaction covered by 765 ILCS 67, the buyer and seller are not bound for three full business days after they accept the unexecuted contract in full and final form. The seller must provide the Attorney General's disclosure by the required time, and the cooling-off requirement cannot be waived. This is not a universal three-day cancellation rule for every lease-purchase or home sale.

Only the written agreement decides. It should state whether a fixed amount or percentage of each timely rent payment becomes a purchase credit, when the credit is earned, what happens after late payment, whether it applies to price or closing funds, whether lender rules accept it, and whether it is lost after valid default or nonpurchase. Rent itself does not automatically become equity.

Legal title normally remains with the owner-seller until the deed is delivered at closing or until the applicable installment-sale terms require conveyance. The tenant-buyer has possession under the lease and may acquire contractual or equitable rights depending on the agreement and law. Those rights are not the same as recorded legal title, and the seller's mortgage and liens remain critical.

The contract and applicable landlord-tenant or installment-sale law control. A careful agreement separates property taxes, hazard insurance, renter's insurance, utilities, ordinary maintenance, capital repairs, code violations, casualty, deductibles, and improvements. Calling the occupant a future buyer does not automatically eliminate current tenant protections or the owner's nonwaivable duties.

That depends on a financing contingency and default terms. Without a valid protective condition, failure to obtain a loan may not excuse a binding purchase duty. The agreement should address application timing, required loan type and amount, appraisal, credit repair, proof of denial, balloon payment, extension, rent credits, deposit, and remedies. A future hope of qualification is not financing approval.

For a transaction covered by 765 ILCS 67, the seller must record the contract or a compliant memorandum within 10 business days after the date of sale and before a later sale or transfer by the seller. A clause forbidding the buyer to record is void and unenforceable. Other lease-purchase structures require separate title and recording analysis rather than assuming this statute applies.

No. The practice questions are original. The PSI Illinois outline, current Illinois statutes and rules, and official Illinois court materials were checked through August 1, 2026. This is exam education, not legal, lending, landlord-tenant, tax, title, disclosure, escrow, or transaction advice. A live deal requires the lease, purchase terms, statutory classification, title, mortgage, local ordinance, disclosures, payment schedule, financing plan, and qualified counsel.