rent-to-own marketing tactics

New York targets rent-to-own marketing tactics

Friday, October 19, 2018

New York State is cracking down on rent-to-own marketing tactics in the manufactured home sector. Eight companies, operating more than 100 manufactured home parks throughout the state, have agreed to revise contracts and refund tenants’ down payments if they’re unable to exercise the option to purchase their homes.

State Attorney General Barbara Underwood announced the settlement as she released details of an investigation into the sector’s use of contracts heavily weighted against prospective homebuyers’ interests. Through the option-to-purchase approach, they legally remained tenants until the end of the option period, but were induced to waive many of their regulatory protections.

For example, contracts typically demanded that optionees submit a non-refundable down payment and assume costs for maintenance, repairs and taxes throughout their tenure. Investigators found evidence of abuse as optionees were required to accept their manufactured homes without prior inspection, while landlords were indemnified against liability.

Although marketed as a path to home ownership for people who are unable to secure mortgage financing, Attorney General Underwood argues the practice preys on the vulnerable through imbalanced rules that place them at heightened risk of losing their investment. “New Yorkers across the state are already struggling to afford a home, and these companies took advantage of that struggle, promising home ownership and, instead, leaving families with default, eviction and financial devastation,” she asserts.

Under the terms of the settlement, existing and new optionees with the eight companies can withdraw from rent-to-own agreements and receive reimbursement of their down payments and any expenditures made on maintenance, non-minor repairs and taxes. In future, option-to-purchase agreements must clearly state, in capital letters, that it is a lease, not a contract for home ownership.

After wresting these concessions from the eight companies — Garden Homes Management; Harper Homes; Hoffman Homes; Horizon Land Company; JKLM Communities; Kingsley Management; Sun Communities; and UMH Properties — Underwood pledges to implement further reforms in the manufactured home sector.

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