Lease Option, Rent to Own, Bond for Title, Lease Purchase, Land Contract, etc.

Recently, SCR has received numerous calls inquiring about "rent to own" transactions which go by many different names.

If your customer or client is interested in a "rent to own" transaction, you should refer them to their attorney who can counsel them on the pro's and con's as well as draft the documents.

While "rent to own" may fit certain customers' and clients' needs instead of a purchase money loan, there are significant issues for all involved.

1.  Owners cannot evict in Magistrate Court.  Owners must hire a law firm to foreclose on the equitable ownership interest.  This can cost thousands of dollars and take months.  To avoid this issue, owners can simply lease to the tenants.

2.  Buyers can be damaged if the owners do not pay the mortgage and property taxes.  The resulting lienholder foreclosure or county tax sale can harm the buyers.  To avoid this issue, buyers can hire a law firm to take the monthly payment into escrow and disburse to lienholders (aka bank), pay property taxes, pay insurance, pay owners, pay REALTORS, etc.

3.  REALTORS often don't get paid.  When these transactions fail to close for any number of reasons, the REALTOR is harmed.  To avoid this issue, get paid as much as you can, as soon as you can.  Alternatively, you can be paid monthly from the monthly payment.

The SCR lease has a warning about combining the lease with any sort of option to purchase in the future to avoid these issues.  Call your legal hotline for more information.  800-233-6381.

The parties should hire SC lawyers to assist with this type of transaction and counsel their clients about these issues. 

Many buyers who cannot obtain financing or sellers who cannot easily find a buyer may desire this type transaction despite the issues.

SCR is interested in information on "rent to own" transactions.  If you have any helpful tips, horror stories, or success stories please contact SCR.