Rent to own vs. Purchase with deferred payment

In an interview with the real estate agent Patricio Battiato (team leader of teambattiato), the director of Remax Golden Mile, Marcello Dodi, offers us a review on two types of purchase-sale contract, rent with option to buy vs. Rent with deferred payment, in order to establish what their differences and advantages are.

As is well known, these are two different forms of purchase-sale contracts. The first case consists of a rental contract and the second of a contract with an option to buy. Both ways can be established privately or through a notary. Regarding their differences, it should be noted that the deferred payment contract is a purchase-sale contract whose price is paid in installments by the buyer.

When can you start living in a property once one of these two types of contracts has been established?

In the first case, since it is a rental with option to buy, the person can take possession of the property immediately when the rental contract begins. That is, it is a tenant subject to all the regulations established by the civil code. Then, in the case of the purchase-sale with deferred payment, there is freedom of agreement by both parties, that is, the property can be delivered once the payment has been made or on a certain date.

What are the disadvantages that exist in both types of contracts?

Attention must be paid mainly to the guarantees established by both contracts. In the rental contract with the option to purchase a bank guarantee, deposits, payment insurance can be requested, or a notarial arbitration can be established to establish the agreements between the tenant and the owner. In the other case, a domain reservation pact can be established where possession is handed over without the transfer of ownership. An express resolution condition or mortgage between individuals is not taxed. You can also make a criminal clause where the compliance to which the person who assumes the rent for deferred payment is established.

Are there regulations for both cases?

The purchase with a deferred payment agreement is perfectly typified within the Spanish civil code. On the other hand, the rent with option to buy is not clearly established within the law, because it is, on the one hand, a rental, and on the other, an option to buy. However, it always proceeds under the urban rental regulation that establishes five mandatory rental years.

What happens when you finally decide not to buy a property?

If it is decided not to buy the property, the money invested up to that point is clearly lost. But you can also acquire the property complying with the minimum terms established by law, which are approximately a little more than five years.

In this brief interview, some clarifications are established regarding what would be a contract for the sale of rent with option to purchase and rent with deferred payment are some of the main aspects that should be taken into account when establishing an agreement between parts. Of course there are more details, but in principle with these ideas you can establish differences and choose the format that is most convenient for both parties.