California Attorney General Edmund G. Brown Jr. says his office has obtained a $150,000 settlement for aspiring homeowners who had their entire down payments unlawfully seized by Lease2OwnHomes for missing rent on a lease-to-own agreement.
"We have obtained restitution for renters who were ripped off by an unscrupulous landlord who illegally seized down payments that were part of a lease-to-own home scam," said Brown.
"Rent-to-own," or lease-purchase agreements, are often favored by people who want to own their own home, but lack the down payment. They've been used for years, but consumer advocates say, like any legal transaction, consumers should be aware of their rights.
Under California law, if a renter misses a monthly payment in a lease-to-own program, the landlord may seek only eviction and unpaid rent. In this case, the landlord unlawfully seized the entire down payment for the purchase of the home in addition to seeking the eviction and unpaid rent, according to Brown.
In April, the attorney general sued the company in Sacramento County Superior Court, for allegedly violating section 17500 of the Business and Professions Code, by:
• Providing a lease and option to purchase agreement when the company knew that consumers were not financially capable of meeting monthly payments required to successfully purchase a home. The company also sometimes ignored its own $70,000 minimum annual income requirement for consumers participating in the program
• Falsely claiming that consumers would have time to clean up any bad credit before purchasing their Lease2OwnHome
• Falsely claiming a "Over 96% Success Rate" in helping consumers purchase homes, when virtually no one was able to purchase a home as they described
Lease2OwnHomes reportedly knew that many of the renters who signed up for homeownership would never be able to afford the monthly payments. In one case, the company sold a large house in Stockton to a divorced mother of four who was unemployed and attending school part time. After the woman missed a $1,650 monthly payment, the landlord seized her entire $9,000 deposit on the house in addition to seeking eviction.
The company told consumers, "Bad credit is OK because you will have time to clean up any credit issues like bankruptcy, chargeoffs, low credit scores, and foreclosures before purchasing your Lease2OwnHome." The company also promised to assist with credit repair although the company was not properly registered as a credit repair company, Brown said.
The attorney general said he is currently aware of at least 75 renters in Sacramento and San Joaquin County who signed up for the program.
Company president Quentin Hazell claimed to work exclusively with the market of "untapped future home buyers" who were within a year or two of purchasing homes but who needed "extra time to get financing in place, improve credit or save for a larger down payment."
Under the settlement approved by the Sacramento Superior Court, the company must pay $300,000 in civil penalties if they do not provide consumers with $150,000 in refunds for the down payments they seized.
