Rent-to-Own in Houston

Since January of 2006, renting a property in order to eventually own it has been illegal in Texas. Rent-to-Own is a popular alternative to buying a home for those who do not have the credit to qualify for a loan in order to be able to purchase a home in most states. The agreement is that the buyer, who is currently the renter, will purchase the property at a later date for a predetermined price. The money that is paid in rent will not go towards the purchase of the home and the rental agreement and purchase agreement are separate. However, the rental security deposit is utilized as a down payment for the home that the buyer is interested in purchasing.

Rent-to-Own became illegal in Texas because many buyers were unable to close on the home and lost their deposit as well as the money they spent in hopes of being able to own a home. Even though it is illegal, many Rent-to-Own scams still remain today.

What can be done?

Similar to Rent-to-Own, residents of Texas can do something that is called Lease-Option. Many confuse the two and believe them to be the same but they are not. Lease-Option combines the rental agreement with the purchase agreement. Rent is usually higher in that it includes an option consideration which guarantees that the renter will be able to purchase the home at a later date. The price is pre-determined, like with Rent-to-Own, and the renter is guaranteed to be able to purchase the property at that price regardless of changes in market. Texas law restricts Lease-Options to six months and sellers must transfer the title to the buyer during that period.

What does the law say about Lease-Options and Rent-to-Own?

The bill that covers Rent-to-Own and Lease-Option laws in Texas is House Bill 1823. This law specifies that sellers are unable to lease house unless they completely own the home and there should be no pre-existing financing on the home. That way, someone is unable to purchase a home and sell it before having sole ownership which is commonly done by real estate agents. The term of a Lease-Option is three years and within that time, the buyer is protected.

Where can I find more info?

Steve Davis, a Texas Licensed Attorney, Real Estate Broker and Mortgage Broker, has written a book called Understanding Texas Lease Options which provides more information on how Lease Option functions. It includes the complete Texas Revised Statute covering Lease Options as well as answers common questions.