Beware of Rent-To-Own Agreements

Many people who sign rent to own agreements end up evicted and lose all the money they put into the home!

A rent-to-own home may seem like a good choice if you want to buy a home right now but need a little time to save for a down-payment or build up your credit rating. But at LawNY, we have noticed that some landlords “sell” the same home over and over again.

Tenants sign a rent-to-own agreement, move in, and fix up the home. After six months or so, the landlord finds a reason to evict the tenants and keeps all of their money and their improvements. Then the landlord gets someone new to sign a rent to own agreement.

Read the rent-to-own agreement and think about getting a lawyer to read it.

The rent-to-own agreement is both a lease and a purchase offer in one set of papers. (It is sometimes called a “lease/purchase" or a lease with an "option"). Usually the rent to own agreement will also say that:

1. In order to get a rent credit, you have to pay your rent on time. Any payment made after the due date will give you 0% rent credit toward your home purchase for that month, a late fee may apply, and you will not be building any equity in the house. That means none of your rent money will go towards buying the house.

2. Maintenance of the home is your responsibility as the tenant-buyer. This includes things like broken windows from stones or baseballs, clogged drains, peeling paint, broken appliances, burnt out bulbs, lawn work, snow removal, etc. Any major repair should be the owner’s responsibility, but many landlords will try to force you to pay for these major repairs as well.

3. You must often pay a deposit that the landlord calls an “Option Consideration.” Option Consideration can be 2.5% to 7% of the sale price of the home. It is usually a non-refundable payment, of which 100% is supposed to be put toward the sale price of the house. It is not a security deposit. If you do not buy the home at the end of the lease term, or if you are evicted before you can buy the home, you will lose all of the money that you paid for the option.

Many people ended up evicted, not home owners.

On October 2, 2005, Bob Mahlburg, a reporter for the Sarasota Herald-Tribune, wrote an article about a large lease-to-own program in Florida that had caused lots of complaints. Over a 5-year period hundreds of deals were made under this program but very few houses were bought. In fact, there were more evictions than houses bought. The contract used in this program made it easy for the seller to evict the tenant and make another deal with new hopeful buyer. This report can be found at:

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This article provides general information about this subject. Laws affecting this subject may have changed since this article was written. For specific legal advice about a problem you are having, get the advice of a lawyer.  Receiving this information does not make you a client of our office.


HF-RTO v. 2.25.08
J. Hogue

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