Understanding Rent to Own Laws

Rent to own home programs give renters a chance to become homeowners with low upfront costs and less than perfect credit. State specific laws regulate how sellers manage property listings and provide protection to potential rent to own buyers. The Rent to Own Protection Act and the Consumer Rental Purchase Agreement Act are two proposed Federal laws that, if passed, will provide additional protection to consumers. Since, as of April 2010, no Federal law addressing rent to own properties exists, buyers should familiarize themselves with the rent to own agreement act of the state the property is located in.

Advertising Restrictions

Sellers cannot advertise property lease amounts or lease terms unless they customarily adhere to the advertised terms for all properties. This prevents sellers from attracting buyers with low purchase or rental prices that are not always an option. Sellers are also required to advertise deposit amounts, lease fees, and complete lease terms (lengths and contract conditions) if the seller advertises the monthly payment amount of a property that is for sale.

Prohibited Provisions

Rent to own agreements cannot contain provisions that require buyers to allow the garnishment of wages or other sources of income. The agreement cannot require a buyer to agree to access to the property during a repossession attempt that leads to a breach of the peace. Sellers are also prohibited from requiring buyers to waive the right to a hearing or trial if the agreement is breached.

No Excessive Fees

Seller cannot include unfair provisions or high fees in the rent to own contract. The seller cannot require the buyer to pay high collection costs, early termination fees, or late payment fees unless the fees are related to contract reinstatement. Maximum fee amounts are determined by state legislation. If the buyer decides to terminate the contract the seller must allow the buyer to return the property.

Allow Tenant to Reinstate Lease

The seller must give the buyer an opportunity to reinstate the lease if a payment is missed. The reinstatement fee should not be greater than the missed payment amount and a small fee that was previously disclosed in the contract. Once the reinstatement fee has been paid the seller must adhere to the agreements stated in the original contract. No additional provisions or rules can be added to the contract after it is reinstated.