Legal Issues With Rent-to-Own Housing

Rent-to-own housing provides the opportunity for non-traditional buyers to become home owners. In a rent-to-own arrangement, sometimes also called a a lease purchase option, you add an option fee to your security deposit and usually pay extra money with your monthly rent. The extra money that you pay should get applied to the cost when you eventually execute your option and buy the house. However, rent-to-own properties are frequently more complicated than they seem.

In most leases, the tenant pays rent and the landlord takes care of the property. While the tenant may mow the lawn or change light bulbs for herself, the landlord takes care of major repair expenses. In a lease purchase, though, the tenant could end up responsible for every repair. As such, it's important to read the agreement before you sign it to see what the landlord expects you to do.

When you get a house in a rent-to-own transaction, you usually spend thousands of extra dollars to get some rights to the property. When you buy a property, your rights get protected by having a deed recorded, making your legal interest a matter of public record. With a lease option, your interest rarely gets recorded, making it possible for your landlord to take mortgages out secured by the property or even sell the property out from under you.

The legal document underlying your rent-to-own could contain unreasonable terms that, while fully legal, end up eliminating your rights. For example, your landlord could put in a provision that cancels your option if you pay just one day late, or set the option up so that the price will always be above the fair market value of the home, meaning that you've thrown away your payments. Given that these arrangements are usually minimally regulated, there is almost nothing that a landlord can't slip in.

One of the other legal problems with a lease purchase can actually benefit you as the tenant. They can be created in such a way that the lease purchase option actually becomes a sale. While this is a legal gray area since the lines aren't always clear, the more responsibilities you take and the more you spend, the more likely it is that you could be considered a buyer instead of a tenant. This could give you the same legal rights as an owner, starting from the date you first signed the lease.