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Rent to Own Homes: Legal Considerations in Canada

Rent to Own homes have gained significant popularity in Canada as an alternative path to homeownership. This unique arrangement allows aspiring buyers to rent a property while simultaneously working towards owning it. Understanding the legal considerations involved in Rent to Own real estate agreements is crucial for both tenants and landlords.

In this blog post, we will delve into the legal aspects of Rent to Own real estate contracts in Canada, including the specific components that should be included.

Math Behind the Renter's Payment

Rent to Own real estate agreements involve a dual-purpose payment structure that combines the monthly rent payment and the contribution towards the down payment. Each month, the tenant makes two separate payments:

  1. Monthly Rent Payment: Similar to a traditional lease, the tenant pays rent for the occupancy of the property. This payment covers the landlord's costs, such as property taxes, insurance, and maintenance.
  2. Monthly Principal Payment: In addition to the monthly rent payment, the tenant also contributes towards building their downpayment. This monthly principal payment accumulates over time and is credited towards the future purchase of the property. The principal payment, combined with any initial down payment, forms the basis for the tenant's equity in the property when exercising the option to buy.

By making these dual payments, tenants benefit from a portion of their monthly rental expense going towards their downpayment, allowing them to accumulate equity while renting.

Example Scenario

To illustrate how a Rent to Own real estate agreement works, consider the following scenario.

  • John is renting a property under a Rent to Own real estate agreement.
  • He pays $1,500 monthly, composed of $1,200 in rent and $300 in principal payments.
  • After three years, John has accumulated $10,800 towards the down payment, which he can use when exercising the option to purchase the property. John also spent $43,200 in rent that he will not get back.

What Should be Included in a Rent to Own Home Contract?

A comprehensive Rent to Own Home contract should encompass both a lease agreement and a contract of purchase and sale. Here are the key elements that should be included in the contract.

Identification of the Property and Parties

Clearly identify the property being rented and the parties involved, including the tenant-buyer and the landlord-seller.

Rental and Purchase Terms

Define the rental period, the monthly rent payment, and the option to purchase timeline. Specify the purchase price and any rent credits or down payments applied towards the purchase.

Responsibilities and Obligations

Outline the responsibilities and obligations of both the tenant-buyer and the landlord-seller during the rental period. This includes matters such as property maintenance, repairs, utilities, and insurance.

Appliances to Include

The contract must state what appliances will be sold with the property. Any appliances not included can be taken back by the landlord when the option to purchase is exercised.

How to Write a Rent to Own Home Contract

LegalDeeds is Canada’s #1 online real estate document platform since 1999.

LegalDeeds can write a customized Rent to Own real estate agreement for only $80, offering a cost effective solution compared to law firms. LegalDeeds documents can be customized to accommodate unique terms and conditions, ensuring that the contract meets your needs. You can even preview a watermarked copy of your document for free.

The Rent to Own real estate agreements created by LegalDeeds are valid and compliant in all Canadian provinces. Regardless of your location, you can confidently use LegalDeeds for your Rent to Own agreement needs.

Benefits of Rent to Own Homes

Rent to Own homes offer several advantages that make them an attractive option for aspiring homeowners.

Path to Homeownership

Rent to Own agreements provide tenants with the opportunity to move towards homeownership, even if they don't have the immediate means for a traditional mortgage. This arrangement allows them to gradually build equity while renting.

Test the Property

Renting before committing to a purchase allows tenants to get a firsthand experience of living in the property. They can assess the neighbourhood, the property's suitability for their needs, and determine if it aligns with their long-term plans.

Accumulation of Equity

With a portion of the monthly rent payment allocated towards the down payment, tenants can build equity over time. This can be especially beneficial for those who find it challenging to save a large sum of money for a downpayment upfront.


The tenants can adjust their financial situation or improve their credit score during the rental period before officially purchasing the property.

Purchase Price Protection

In a rising real estate market, Rent to Own agreements provide tenants with the opportunity to lock in a purchase price at the beginning of the agreement. This can protect them from potential price increases, allowing them to buy the property at a predetermined price.

Close Your Deal Today

LegalDeeds provides a convenient and efficient solution for creating Rent to Own real estate contracts. LegalDeeds documents are generated in minutes and legally valid in all provinces. With LegalDeeds' modern website, you can write your contract immediately, eliminating the need to wait for your lawyer's response.

Remember, Rent to Own contracts are complex legal documents, and it is always advisable to seek legal advice to ensure compliance with provincial laws and regulations. Whether you choose to consult a lawyer or use a trusted platform like LegalDeeds, having a well-drafted Rent to Own contract is essential for a successful and secure Rent to Own real estate deal.



LegalDeeds is Canada's #1 online legal document provider since 1999. We deliver them fast, and for less.