Watch Out For 'Rent To Own' & 'Lease Option' Scams

In an article appearing in the January, 2006 issue of Realty Times, a number of tactics that scammers use in the context of so-called "rent to own" and "lease option" real estate deals were described.

• Problems with lease options arise when investors intentionally target consumers who are relatively unsophisticated about real estate or contract law, and who have little real likelihood of ever qualifying to purchase the property. In those cases, the promoters are essentially in the rental business and convince unsuspecting tenants to pay them fees and premium rents, plus pick up most routine property maintenance costs.

• In Florida, consumers complained to the attorney general that the lease-option promoter included clauses in rental contracts that permitted them to be evicted -- and their option fees forfeited -- for the most minor problems, such as missing a rent payment deadline by one day or failing to keep the house broom clean.

• Other problems surfaced in Texas, where promoters allegedly offered lease-options to lower income tenants on properties with serious title issues. In some cases, ..., promoters 'acquired' houses from owners facing imminent foreclosure by taking over their payments to lenders [and subsequently offered 'rent to own' deals to unsuspecting tenants without first addressing the legal issues with the existing mortgage lender],

• The victims "were almost always first-time buyers who had no idea that the contract and lease they signed contained clauses that made it almost impossible for them to actually exercise the option" and acquire legal title to the house [according to one housing law expert].

For more, see "Lease Option" Real Estate Draws Scrutiny.

For more on "Rent To Own" and Lease / Option real estate scams, see "Rent To Own" Scams I. rent to own lease purchase option scams zebra; equity skimming unwittingly delta