Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

In a lease agreement, what does an Option Agreement allow a tenant to do?

1. Negotiate lower rent rates

2. Purchase the property during or at the end of the lease

3. Extend the lease term without additional fees

4. Assign the lease to another party

The correct answer is: Purchase the property during or at the end of the lease

An Option Agreement in a lease context provides a tenant with the right to purchase the property during or at the end of the lease period. This provision allows tenants to have a first choice to buy the property, typically at a predetermined price, which can be particularly beneficial if property values are expected to rise. This option to purchase can lead to more commitment on the part of the tenant as they may be inclined to maintain and improve the property with a potential ownership in mind. This mechanism supports tenants who may be interested in homeownership but prefer the flexibility of leasing initially. It can also benefit landlords by attracting tenants who are serious about the property and may lead to a higher likelihood of property maintenance and care. The other choices focus on different aspects of leasing that do not pertain to the purchase option, such as negotiating rent rates, extending lease terms, or assigning leases, which are separate contractual rights and do not constitute the primary function of an Option Agreement.