What is the exam-ready distinction?
| Official syllabus topic | Contracts: Lease Options, Purchase Obligations, and Default |
|---|---|
| Official PSI area | Contracts |
| Published weight | 19% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Lease option | Lease purchase |
|---|---|---|
| Purchase feature | Tenant receives a right, but generally not an obligation, to buy | Parties generally undertake a binding future purchase obligation |
| Exercise | Tenant must exercise exactly as the option provides | Purchase duties follow the signed agreement without a separate election in the usual model |
| Failure to buy | Option may expire and option consideration may be lost as provided | Can create purchase-contract default remedies |
| Caution | Rent credit and option consideration depend on the document | Labels vary, so legal effect controls |
Decision rule
Georgia-specific distinction
Worked example
Scenario. A tenant pays stated option consideration for the right to purchase by June 30 but makes no promise to exercise the right.
Reason it through. Only the owner is bound to keep the purchase opportunity open. The tenant retains a choice rather than a purchase duty.
Answer. The arrangement is a lease option under the facts given.
Common exam traps
- Assuming the label controls over the promises
- Treating rent as automatic purchase credit
- Ignoring option exercise formalities
- Assuming a lease purchase guarantees financing
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A tenant pays $3,000 for the right to buy the rented house for $260,000 before the lease ends. Nothing in the agreement requires the tenant to buy. What is this arrangement?
- A. A lease option
- B. A lease purchase
- C. A right of first refusal
- D. An installment land contract
Show answer and explanation →
Answer: A. A lease option
A lease option pairs a tenancy with the tenant's right, but not duty, to buy during a stated period. The tenant can buy now on set terms, which is why this is not a right of first refusal. Calling it a lease purchase ignores that the tenant made no promise to buy.
Question 2Under a lease option, the tenant decides not to buy before the option period ends. What is the usual result?
- A. The tenant is in default and may be sued to close
- B. The owner must refund the option fee with interest
- C. The option lapses and the fee is kept as agreed
- D. The lease automatically becomes a lease purchase
Show answer and explanation →
Answer: C. The option lapses and the fee is kept as agreed
Because the tenant never promised to buy, letting the option lapse is not a breach, and the option consideration is usually lost as the document provides. Default and suits to close belong to a lease purchase. Assuming the fee must be refunded ignores that it paid for keeping the offer open.
Question 3A document titled "Lease Option" says the tenant shall buy the home on March 1 and that failing to close is a default. How should the arrangement be classified?
- A. As a lease option, because the title decides
- B. As a lease option, since rent credits are optional
- C. As a simple lease, since no deed has been signed
- D. As a lease purchase, based on the binding promise
Show answer and explanation →
Answer: D. As a lease purchase, based on the binding promise
The document's actual promises decide its legal effect, and a binding duty to buy with default remedies is the mark of a lease purchase. Labels are often used loosely. Trusting the heading over the terms is the trap, and a Georgia licensee should refer questions about custom terms to an attorney.
Ready to move on?
You have this distinction down when all of these are true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one key fact.
- Explain the rule or fact that makes each distractor wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Client Versus Customer Under Georgia BRRETA. A lease option brings a licensee into contact with both tenant and owner, and Client Versus Customer Under BRRETA explains how to tell which one is a client by finding the brokerage engagement rather than looking at who pays or who is friendly.
Return to the complete exam-concept library or the Contracts hub.