Consumer Notice: Rent-to-Own Plans

Rent-to-Own Plans

Are you paying more than you bargained for?

If you are struggling to come up with the cash for a down payment or you face barriers to homeownership such as bad credit, debt, or money management issues, you may be tempted to enter into a rent-to-own plan to buy a home.

Rent-to-own arrangements — also known as lease-to-own and lease option plans — are legal in BC and can be an effective path to home ownership for some buyers, but they have risks. Before you enter into a rent-to-own plan, make sure you have enough information to make a well-informed decision about whether rent-to-own is right for you:

About Rent-to-Own Plans

In a typical rent-to-own plan, the buyer and seller sign an agreement giving the buyer the right, for a fee, to purchase the property at the end of a set term, for an agreed-upon price.

The buyer pays rent to the seller, plus a monthly installment towards the down payment. At the end of the contract term, if the buyer qualifies for a mortgage for the remaining balance, the transaction closes.

Unfortunately, rent-to-own plans don’t always live up to expectations.

Understand the Finances

Before entering a rent-to-own agreement, consider:

• Is the rent charged by the seller substantially higher than the “going rate” for the area?
• What will happen if you are unable to keep up with the payment schedule?
• Is the ultimate purchase price reasonable?

If you have to walk away from the deal, you will have paid a fee — and a premium on rent for several years — with nothing to show at the end. Before signing, consider whether you can afford this risk.

Understand the Contract

Because rent-to-own agreements can be complicated, it is recommended that you seek independent legal advice before signing. A lawyer can help you to negotiate the terms of the agreement, and identify potential issues, such as:

• Are the contract terms flexible?
• Are maintenance fees included?
• What happens if your rent is late?
• Do any of the terms of the agreement raise “red flags”?

If you feel that a real estate licensee representing you has not acted in your best interests, or may have otherwise contravened the Real Estate Services Act, contact the Real Estate Council of BC promptly: [email protected] | 1-877-683-9664

About the Real Estate Council of BC

The Real Estate Council of British Columbia protects real estate consumers by regulating the conduct of real estate professionals under the Real Estate Services Act.

We set the standards for the required education and training of real estate professionals, issue licences, and investigate complaints from members of the public. When a licensed real estate professional contravenes the Act, we may issue a fine, suspension, reprimand or licence cancellation, as appropriate.

This information is provided to you by the Real Estate Council of British Columbia (RECBC).

Your feedback is always welcome and can be sent to [email protected].