Rent-To-Own, Contract For Deed, Land Contract Rackets: A New Breed Of Landlord Blurs The Lines Between Renter & Homeowner; Confusing Contractual Terms Leave Customers Unsure If They're Owners Or Tenants

The New York Times reports:

• Alex Szkaradek is a landlord who seems to have the best of both worlds.
  
  Mr. Szkaradek, 36, collects rent, but he never has to pay for repairs on any of the more than 5,500 homes — many of them rundown — that his firm manages across the country.
  
  The firm, Vision Property Management, blurs the line between what it means to be a renter and a homeowner. These companies do not offer regular leases or mortgages — they offer “rent to own” contracts on homes that require tenants to make all repairs, no matter how big or small.
  
  Mr. Szkaradek says Vision, a leader in the fast-growing market, is bringing the dream of homeownership to Americans who lack good credit or are too poor to qualify for mortgages.
  
  In many communities, housing prices have recovered from the financial crisis. At the bottom end, however, banks have all but stopped making loans for homes worth less than $100,000, leaving millions of people with few options.
  
  But these rent-to-own agreements reside in a gray area of the law. An examination by The New York Times of contracts and court filings, as well as interviews with housing lawyers and more than a dozen of Vision’s customers across the country, found that these deals are risky, lack consumer protections and may not be enforceable in some states.
  
  Most tenants walk away with nothing, having sunk money for rent and repairs into homes they had once hoped to own. Others faced surprise evictions, having signed a contract that did not disclose what repairs were needed, yet set a deadline for making sure the home was up to local housing code. As different tenants move in and out of the same property over the course of years, many homes fall further into disrepair.
  
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  “We’re seeing an influx in these contracts,” said Katarina Karac, a city lawyer for Columbus, who is involved in one case the city has against Vision. “It looks like a landlord-tenant relationship, except instead of having the landlord take care of the property, they are putting that obligation on the tenant,” she added.
  
  Blurred Lines
  
  Every home rented by Vision comes “as is” and has strict contractual terms that require a tenant to pay for any repairs, no matter how big. Renters are given a few months to deal with any outstanding building code violations and to make the homes habitable.
  
  In interviews, as well as in court documents, customers said they were confused by the contracts’ terms and requirements, and were not sure whether they were owners or renters.
  
  They signed their leases and put down an initial payment to reserve the right to buy the house. Unlike most typical home purchases, rent-to-own contracts have no requirement to obtain an independent home inspection. The customers contend they were not informed of outstanding issues with Vision homes, many of which the company had bought for $10,000 or less.
  
  Tenants who are evicted during the tenure of these seven-year contracts walk away empty-handed, receiving no credit for money spent on repairs or renovations.
  
  Rent-to-own leases are similar in many ways to contracts for deeds: long-term, high-interest installment contracts that call for the resident to make monthly payments to the seller. Unlike a contract for deed — which typically lasts 30 years, at the end of a Vision contract, tenants still need to find financing to complete the deal. The buyer does not receive legal title to the home until the last payment is made.
  
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  “If you’re doubling your money off of people who are scraping by and you’re taking advantage of their vulnerability to enrich yourself, that is being predatory,” said Beryl Satter, the author of the 2009 book “Family Properties,” which chronicled the exploitation of black homeowners in Chicago.

For more, see Rent-to-Own Homes: A Win-Win for Landlords, a Risk for Struggling Tenants.

See generally, Spotlight Continues To Burn On Predatory Land Contract/Contract For Deed Real Estate Rackets (Arrangements "Are To Housing What Payday Loans Are To Banking & Rent-A-Centers Are To Furniture!").