Rent-To-Own, Then Left Without A Home
Angel Trosper lives in a concrete, one-story house on a street in Franklinton. It’s a new location for her: On New Year’s Eve, she was evicted from a house across town she dreamed of buying.
“All I did was cry. That’s all you can do,” Trosper says. “I more or less lost $50,000 to $60,000 to this guy, when I thought we were purchasing this house.”
Trosper’s troubles started six years ago. She and her husband Ron lived in Texas at the time, but were looking to move home to Columbus. They wanted to bring along Ron’s parents and brother, so they would need a lot of space.
The couple found an upper and lower duplex house that needed some work. Trosper says the landlord gave them a bad feeling, but they went ahead and signed a “rent-to-own” agreement.
“He literally met us at a diner donut shop on Lockbourne,” Trosper says. “Any other time we met up with him throughout these five years, it was always, ‘Meet me at Speedway on Weber and (Interstate) 71.’ You don’t have an office, dude?”
After they moved in, the roof constantly leaked and breakers would pop.
“It really was a fixer-upper,” Trosper says. “To tell you the truth, the city needs to condemn that house.”
But otherwise, everything was going well. Until it wasn’t.
“We thought we were making the last payment May of 2017,” Trosper says. “We started receiving eviction notices as of August 2017.”
Columbus city officials and fair housing advocates are concerned about what some are calling the successor to the subprime mortgage crisis. Leases with an option to purchase, or “rent-to-own” homes, are advertised as an affordable way to fulfill the American Dream of home ownership.
But some who sign on that dotted line find themselves financially worse off than when they started.
How Rent-To-Own Works
Typical rent-to-own agreements, or lease with option to purchase, start with a down payment and monthly payments after. Those monthly payments can count toward the final purchase price if the buyer exercises an end-of-lease option.
But if a tenant misses as much as a single payment, they can be evicted, and all of that money invested is considered lost rent.
In Trosper’s case, she says she made a minor clerical error when exercising her option to buy, so she was evicted. She was supposed to send in $1 and a certified letter stating she wanted to purchase the home.
“Went to court, tried to fight it, ran out of money in December,” Trosper says. “That’s when we just came to the agreement that we were just giving up, we couldn’t do it no more.”
Trosper’s former landlord did not respond to requests for comment.
Since the mortgage crisis ended, fair housing advocates and groups like Legal Aid Society say they’ve seen an increase in rent-to-own agreements and related evictions. But it’s impossible to know just how many rent-to-own properties are in Columbus because they don’t have to be reported by landlords. Rent-to-own arrangements are similar to land contracts, but the former is not legally required to be filed with the Franklin County Recorder’s office.
The deals are most popular in lower-income neighborhoods, used by small-time landlords and larger real estate companies. Some of those companies are local, while others are based out-of-state.
Legal Aid Society attorney Jyoshu Tsushima runs an eviction clinic at the Franklin County Courthouse. Several times a month, Tsushima sees clients suffering in their rent-to-own arrangements. They usually lose out.
“When the tenants do sign off on these kinds of contracts, it really bites,” Tsushima says. “Because we’re talking about fairly large sums of money that end up getting lost just because they didn’t understand what the terms of the contract were.”
sushima says often, people think they’re in land contracts, which offer more consumer protections and more recourse if buyers get behind on payments. There’s also a record of land contracts at the county recorder’s office.
“I think it is almost the new form of the foreclosure crisis,” says Legal Aid Society attorney Melissa Benson. “There was so much predatory lending run through banks a decade ago, then you had the collapse of the banking industry and those same individuals who want to purchase homes but don’t have good credit.”
“The Devil’s In The Details”
Columbus City Attorney Zach Klein says up to 10 percent of cases in the city’s environmental court relate to rent-to-own agreements.
“These situations are ones where you may be able to afford the rent, but you don’t know that you’re buying, in air quotes, a property that may have outstanding code violations on it that you’re on the hook to fix,” Klein says. “The devil’s in the details on how these transactions are arranged.”
“If you promise to make your rent on time for so many months – typically 15, 20, 25 years – you take care of all of the problems that may arise with your house, including code and building violations, furnaces, sewers, etc,” Klein continues. “If you fail to do any of those and you have to make those payments, the owner of the property can then come in and basically repossess it.”
Klein wants to keep a close eye on rent-to own transactions in the city.
“I believe this is a really predatory practice, and one that is overwhelmingly slanted towards the landlord and not the potential buyer. We wanna be aggressive in environmental court from the city’s perspective,” Klein says. “But at the same time, the idea is, how do we preserve that contract and the person who’s working hard to maintain their monthly payments so they can realize the American Dream? We wanna support that.”
North Linden Area Commission chair Jennifer Adair says rent-to-own arrangements are a growing problem in her neighborhood.
“The commission first became aware of the issue when we noticed a lot of trash in the area. We noticed it on certain streets and noticed it in a frequency that drew our attention,” Adair says.
That trash came from set-outs: when landlords kick evicted tenant’s belongings to the curb.
Now, Adair is trying to work with the city to see how they can increase community awareness about rent-to-own. She’s frustrated nothing’s come together yet.
“My Kids Have A Roof Over Their Head”
Meanwhile, rent-to-own companies defend their leases.
Brian Knoppe is a partner with Autumnwood Group, a real estate investment company that started out as custom home-builder in 1987.
Through the company, 127 families have successfully executed the option to purchase. It is not clear how many families have not successfully purchased a home through the lease program.
Knoppe says he’s seeing an increase in young professionals consider the rent-to-own path to home ownership.
“Especially in today’s market, I’m working with more and more customers that do have good credit and do have good finances, but they’re struggling to find a house,” Knoppe says. “There are qualified buyers out there that the moment a home goes on the market, they’re putting in offers well above ask and they’re not getting the house.”
Such customers look at Autumnwood’s rent-to-own portfolio as a way to access properties that otherwise aren’t on the market, according to Knoppe.
“Now does it work out 100 percent of the time? It doesn’t because there are some factors outside of everyone’s control that unfortunately happen as life goes on,” Knoppe says.
Knoppe says the top factors that contribute to people not completing their purchase are job loss, a divorce or separation, or an unforeseen health issue – all of which can affect the household’s income. But Knoppe says rent-to-own or lease with option to purchase leases can be a viable alternative for buyers who lack options.
“I think with that option being off the table for some people due to credit, due to finances, that the secondary option being lease purchase is a great route to go,” Knoppe says.
That was the case for Samantha Turlington. The mother of three has been evicted three times and had trouble getting a traditional lease. Instead, she put down $1,900 on a rent-to-own home in the Hilltop through Great City Homes.
“It was a lot, but it’s a house for my kids,” Turlington says. “My kids have their own room. We have our own room. My kids have a roof over their head, basically.”
Turlington and her husband pay $460 every other week to stay in their house. Turlington is not sure when she can execute the option to purchase, or for how much. But she’s holding onto the dream that one day, she can.
“I’m hoping I can get a loan and buy the house,” Turlington says.
All Turlington can do is continue to make her payments and see what happens.
Do you have experiences with rent-to-own agreements? Do you have questions about home contracts that you want WOSU to answer? Ask your questions below, and we’ll use them as we continue our investigation.
This story originally ran on WOSU in April 2018.