Hundreds of Pa. renters were misled about rent-to-own agreements. A judge ordered they be given their homes.
It’s the latest development in a lawsuit the Pennsylvania Attorney General’s Office filed in 2019 alleging deceptive practices by one of the country's largest rent-to-own home selling businesses.
Daniel Ramos was renting the Kensington home he shared with his wife and young children when his landlord lost the property to mortgage foreclosure. The house sold at a sheriff’s sale in 2012 and ended up in the hands of a subsidiary of the national company Vision Property Management.
The following year, Ramos and his stepson signed a contract with the new owner to make a $4,000 down payment and monthly payments with the promise that they would own the home in seven years. Ramos didn’t have good credit and saw the “lease with option to purchase” agreement as a chance to own the home where his family had established a life.
But after he fell behind on payments, the company told him in 2019 that he had to leave, even though he came up with what he owed.
“I was always under the impression that I was going to own the property,” Ramos said. But after talking with a lawyer, he discovered the truth: He had been misled about his rent-to-own agreement. Even if he had made all his monthly payments for seven years straight, he said, “I was never going to be able to own the property.” The total of the monthly payments was far less than the purchase price, and he wouldn’t have been able to come up with the remaining tens of thousands of dollars all at once.
These kind of misleading deals, Ramos said, “hurt people who are trying to do better for their families.”
This month, an Allegheny County judge ordered Vision Property Management, one of the country’s largest rent-to-own home selling companies, and its affiliates to transfer the deeds of 285 Pennsylvania homes to residents, including Ramos, who had been misled into thinking they would be homeowners. That includes nine homes in Delaware County, one in Montgomery County, and 19 in Philadelphia. The contracts are to be considered paid in full.
It’s the latest development in a lawsuit that the Pennsylvania Attorney General’s Office brought against the company and affiliates in 2019, claiming that they had misled more than 650 Pennsylvania residents into entering rent-to-own agreements on dilapidated, foreclosed homes that they were responsible for fixing. The company has faced similar lawsuits in New Jersey, Ohio, and Wisconsin. Lawyers for the companies did not respond to a request for comment Monday.
“The idea of rent-to-own agreements in general is fairly widespread,” said Michael Froehlich, managing attorney of the home ownership and consumer rights unit at Community Legal Services of Philadelphia. “It’s especially widespread in Kensington and other lower-income neighborhoods in Philadelphia, where many people see it as a way to become homeowners if their credit is bad or if there’s some other issue that’s preventing them from qualifying for a mortgage.”
“The American dream of home ownership dies really hard,” he added, “and if somebody is denied a mortgage and they really want to be a homeowner, they may think a rent-to-own arrangement is their best shot.”
The agreement Ramos signed made it seem as if he would become a homeowner after seven years. But six years in, he was only halfway to paying off the house. According to the fine print, that seven-year promise didn’t mean much. A subsidiary of Vision Property Management had bought Ramos’ home for $15,000. Over the years, Ramos paid about $39,500, including the deposit, he said. The total purchase price in the rent-to-own agreement was $72,000.
“Like a lot of these, this contract was built to fail,” Froehlich said. Community Legal Services “always tells clients they’re a bad idea. Don’t do them.”
Once the term of the agreement is up and the lease ends, residents have to pay a balance of tens of thousands of dollars toward the purchase price. If they can’t pay, the owner can eject them through the courts and start the cycle again with another person, Froehlich said.
Unlike in typical landlord-tenant relationships, residents in rent-to-own agreements are responsible for home repairs and maintenance. Residents make payments but don’t build equity and aren’t entitled to homeowner protections. The owner can eject residents for being late on a payment.
Ramos was effectively supposed to be the homeowner, but “they was the ones in control of everything,” he said.
“It really is a lose-lose situation for people,” Froehlich said, “because it’s the worst parts of being a homeowner and the worst parts about being a tenant at the same time.”
At Froehlich’s recommendation in light of the Attorney General’s suit, Ramos stopped paying rent in 2019. A year ago, the Allegheny County Common Pleas Court ordered Vision Property Management and its affiliates to temporarily stop collecting rent.
Pennsylvania sued the company and its affiliates in October 2019 after seeing news reports, hearing from legal aid attorneys, and seeing suits by other state attorneys general. Under “lease with option to purchase” contracts, residents were responsible for making expensive repairs needed for the homes to be livable, which is against the law, according to the Attorney General’s Office. The agreements did not provide ownership rights in a way that residents could afford and residents who fell behind on rent faced immediate removal.
» READ MORE: The skinny on lease-to-own home sales
“Pennsylvanians who were taken advantage of by Vision Property Management and its affiliates’ deceptive ‘rent to own’ schemes will finally be homeowners,” Attorney General Josh Shapiro said in a statement. “My office will work tirelessly to implement the court’s order as quickly as possible and seek fair compensation for anyone who was ripped off and forced to leave their home.”
Hundreds of people who entered into unlawful contracts with the companies no longer live in the homes and were not included in this month’s court order.
Ramos isn’t sure when his home will truly belong to his family. The companies have asked the courts to pause the recording of deeds by the Attorney General’s Office.
“I don’t get my hopes up, you know,” Ramos said.