For many Tennesseans, the dream of homeownership can feel out of reach due to strict mortgage requirements, limited credit history, or lack of a down payment. One option that bridges the gap between renting and buying is a rent-to-own agreement. While these agreements can be a helpful tool, they also come with unique legal and financial considerations that both tenants and property owners need to understand.
At Champagne Law Firm, with offices in Sevierville, Nashville, and Rogersville, we assist clients across East and Middle Tennessee with drafting, reviewing, and enforcing rent-to-own agreements to ensure their rights are protected.
What Is a Rent-to-Own Agreement?
A rent-to-own agreement allows a tenant to rent a property with the option—or sometimes the obligation—to purchase it at the end of the lease term. These agreements usually include:
- Monthly Rent Payments – A portion may be credited toward the future purchase.
- Option Fee – An upfront, non-refundable payment that secures the tenant’s right to buy.
- Purchase Price – Set at the beginning of the lease or determined at the time of purchase.
- Timeline – The lease term, usually ranging from one to three years, after which the tenant may exercise the purchase option.
Benefits of Rent-to-Own Agreements
For tenants/buyers:
- Provides time to improve credit or save for a down payment.
- Locks in a future purchase price in a rising market.
- Offers the chance to “test out” the property before fully committing.
For landlords/sellers:
- Creates a larger pool of potential buyers.
- Generates rental income while moving toward a sale.
- May command a higher purchase price due to flexible terms.
Risks and Challenges
Despite the potential advantages, rent-to-own agreements can also create risks if not structured properly. Common pitfalls include:
- For Tenants – Losing the option fee or rent credits if they cannot complete the purchase.
- For Landlords – Potential disputes over maintenance responsibilities or purchase terms.
- Legal Complexity – Tennessee law requires clear, enforceable contracts to avoid disputes over ownership or payments.
Without legal guidance, both parties may face unexpected liabilities or financial losses.
Rent-to-Own in Tennessee
In Tennessee, these agreements are governed by contract and property law under Tennessee Code Annotated Title 66 – Property. They must be carefully drafted to spell out each party’s rights and responsibilities, including:
- Who handles property taxes, insurance, and repairs during the rental period
- Whether rent credits apply toward the purchase
- What happens if the tenant defaults or chooses not to buy
A well-drafted rent-to-own agreement can prevent misunderstandings and protect both parties.
How Champagne Law Firm Can Help
At Champagne Law Firm, we work with both landlords and tenants throughout Sevierville, Gatlinburg, Pigeon Forge, Nashville, Morristown, Dandridge, Jefferson City, Newport, Maryville, Townsend, and surrounding communities to:
- Draft clear, enforceable rent-to-own agreements
- Review contracts before they are signed
- Resolve disputes if one party fails to meet their obligations
- Ensure compliance with Tennessee property law
Contact Us
If you are considering entering into a rent-to-own agreement in Tennessee, protect yourself with experienced legal guidance.
