Wednesday, June 21, 2017

Aspiring Homebuyer/Couple Under Rent-To-Own Deal Lose Their Home After Two Years Despite Not Missing Any Payments & After Making Significant Repairs; Rent-Skimming Seller Pocketed Deposits, Monthly Payments, Then Stiffed Bank On Undisclosed Mortgage, Allowing House To Go Into Foreclosure

In Clay, Alabama, WBRC-TV Channel 6 reports:
  • Nakecia Stone scrolls through photos of her old home. With a flick of her finger, an image of her daughters cuddling in their bedroom flashes across the screen, followed by another of them in the front yard.

    “I loved the area, I loved my neighbors,” Stone said of the Clay-Chalkville home.

    She says they moved to the single-family home in 2013 under a rent-to-own agreement. It required a $5,000 down payment and $1,000 per month, she said, and promised they could own the house one day in the future.

    “The reason the down payment was so low was that we agreed to do all repairs,” Stone said.

    She recalls they spent about a month and a half cleaning the house of debris, installing new flooring and bathrooms, and refurbishing the outdoor swimming pool.

    “My husband is a workaholic, so him working on the house thinking it was going to be our house…that was over the top for him,” she remembered.

    They enjoyed the home for about two years, until one summer day in 2015. The dream of home ownership was interrupted.

    “My neighbor was coming over to see me one day and she said ‘you’ve got a note on your door.’ A note? I got the note and it says 'You’ve got 30 days to vacate. The house has been placed into foreclosure,'” Stone explained.

    A baffling moment for Stone because she says they always paid the bills on time. But as she would learn, it was not their delinquency that cut her dream short.

    The sellers had a mortgage on the home and had stopped paying the bank, prompting the foreclosure, costing the Stone family their home and investment.

    “When I saw them sell it, I knew it was over,” Stone said with tears in her eyes.

    Some say rent-to-own property agreements, which are like lease-purchase contracts, give people who cannot qualify for a home loan an opportunity to achieve the American dream that would otherwise elude them.

    But, housing lawyers say the agreements are too risky. In Alabama, there is virtually no regulatory oversight. And the agreements promising a chance at home ownership attract people who often cannot afford a lawyer to review the agreements.

    “This is an area where we need some regulatory help,” said Nancy Yarbrough, Executive Director of Birmingham Volunteer Lawyers.(1) She says acquiring the deed to a home through a rent-to-own deed is “like winning the lottery.”
    ***
    Internet posts suggest the prevalence of the rent-to-own offerings across the state. Searching listings for about 6 hours over the course of several days revealed nearly 400 properties offered for rent-to-own.

    But, the lack of public records makes it impossible to know with certainty how many properties have been sold through a rent-to-own transaction, or how many have failed.

    No governmental entity tracks rent-to-own properties. The contracts are not recorded with public offices.

    Lawyers in Texas surveyed about 1,300 people who had rent-to-own agreements. Their findings, reflected in the report “The Contract for Deed Prevalence Project,” show that the deals failed nearly 45 percent of the time.

    “The problem with a lot of these transactions is that the family never ends up with title, they never end up actually owning the home,” explained Professor Heather Way, The University of Texas at Austin. “And families end up spending thousands and thousands of dollars. They think it’s going towards ownership, but it’s not.”

    The Alabama Office of the Attorney General received 99 complaints about landlord-tenant issues in 2016. These would include rent-to-own issues, though those cases are not separately counted.

    Yarbrough, of Volunteer Lawyers, said her team of 500 lawyers volunteering time to help low-income people of Birmingham, assisted with more than 540 housing cases. Many, she says, were rent-to-own agreements.

    And, [lead housing lawyer for Legal Services of Alabama(2) Chris] McCary estimates he gets around 40 cases of rent-to-own issues every year.

    “I know it’s just a drop in the bucket of what’s out there,” said McCary. “I may have just one case on the docket for that day, but I’ll see several cases go in front of me.”

    And he believes there is room for success too.

    “I only see the ones where the dream has been interrupted, but it could be that some that are successful,” he said. “It would be hard to predict the other way how many are successful. There’s no regulation of it, there’s nothing to keep up with it,” explained McCary.

    But Yarbrough isn’t as optimistic.

    “It’s like winning the lottery,” she said of getting deed through a rent-to-own deal.

    Losing the house can happen in under a month.

    When there’s a breach of a rent-to-own agreement, through non-payment or otherwise, and a lawsuit is filed, usually it’s in district court. It’s called an “unlawful detainer.”

    “It is a fast mechanism, probably the fastest we have in Alabama to get someone off the property,” said attorney McCary. Someone can be forced out of the home in under a month.

    Landlords file unlawful detainer actions on the fast track against tenants when agreements do not make the promise of ownership and don’t require larger down payments.

    But lawsuits against property owners, where there is an ownership interest, a deed or mortgage, must be filed in a different court, called the circuit court. There, the process can take months.

    McCary says when sellers in rent-to-own agreements sue, they typically file on the faster track in district court.

    “I would assume that’s why some try to file in the district court,” said Judge Robert P. Bynon, Jr. He presides over the district court for Jefferson County in Birmingham.

    “Sometimes, you have a seller trying to take advantage of a buyer, or a buyer trying to take advantage of a seller, and you’ve got to work in good faith with one another. That’s the only way this is going to work,” Bynon explained.

    When he sees disputes over rent-to-own agreements filed in the district court, he throws them out.

    That’s got to go to circuit court for an ejectment action. It’s a completely different process and it takes a little longer than an unlawful detainer,” said Bynon.

    But many times it’s hard to know when to toss the case because often buyers represent themselves and may not know the significance of the down payment they made, and how that could potentially get them more time in circuit court.

    Sometimes, nobody, the seller nor the buyer, will not tell the court that they paid $20,000 down to have the option to buy and rent this house. You find out way after the case is over with,” said Bynon.

    And that’s how, McCary says, buyers in the rent-to-own deals are often forced out of the home on the fast court track.

    “Over the 90 percent of the time, they treat them like a tenant,” explained McCary. "Someone can be out in under a month.”

    [...]
For the story, see On Your Side Investigation: Do unregulated rent-to-own contracts deliver what they promise?
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(1) The Birmingham Bar Volunteer Lawyers Program (BBVLP) is a non-profit program that matches income-qualifying residents of Jefferson County, Alabama, with volunteer attorneys to help with legal matters. Applicants must meet certain financial criteria before they can be assisted through the Program.

(2) Legal Services Alabama is a non-profit, public interest law firm that serves low-income people throughout the state by providing civil legal aid and by promoting collaboration to find solutions to problems of poverty. It has seven offices, located in Birmingham, Dothan, Huntsville, Mobile, Montgomery, Selma and Tuscaloosa. land contract for deed

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