A purchase option gives the tenant the right — but not the obligation — to purchase the leased property from the landlord during a defined exercise window at a specified price or by a specified valuation method. It is most common in sale-leaseback transactions, owner-user leases, and long-term ground leases where the tenant has a strategic interest in owning the underlying real estate.
By Angel Campa, Founder · Updated March 2026
Purchase options can be enormously valuable when property values appreciate significantly during a long lease term. A tenant who negotiated a purchase option at a fixed price 10 years ago in a strong market appreciation cycle may be holding a right worth millions of dollars above the option price. For the landlord, an outstanding purchase option can complicate property sales and financing, since lenders and buyers must account for the tenant's purchase right when underwriting the transaction.
Negotiate the purchase price at a fixed amount (most tenant-favorable in appreciating markets), at a formula tied to a capitalization rate applied to net operating income, or at fair market value as determined by mutual appraisal. Include a right of first refusal to match any bona fide third-party purchase offer as a backup if the purchase option is not exercised during its primary window. Require the landlord to deliver title free and clear of all liens and encumbrances, with an environmental indemnity, upon exercise of the purchase option.
Fixed-price purchase options (most tenant-favorable), market-value purchase options with appraisal mechanism, purchase options exercisable only at lease renewal, and purchase options limited to the initial owner and not assignable.
Lextract extracts these fields directly from your lease PDF when this clause is present:
Right of First Refusal (ROFR)
A right of first refusal (ROFR) gives the tenant the right to match any bona fide third-party offer the landlord receives for adjacent or specified expansion space before the landlord can lease that space to the third party.
Right of First Offer (ROFO)
A right of first offer (ROFO) gives the tenant the right to make the first offer to lease specified expansion space before the landlord markets that space to third parties.
Contraction Option
A contraction option — also called a reduction right or give-back right — gives the tenant the right to reduce the size of the leased premises at specified points during the lease term, typically by surrendering a defined portion of the space.
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