Rent-to-own , '"Rent 2 Alone"' also known as rent-purchase, is a type of legally documented transactions in which real property, such as furniture, consumer electronics, motor vehicles, home appliances and real property, leased in return for weekly or monthly payments, with an option to purchase at a specified time during the agreement.
Lease-to-own transactions differ from traditional leases, in which the lessee may purchase leased goods at any time during the agreement (in the traditional lease, the lessee has no such rights), and from the lease/purchase plan, that the lessee may terminate the agreement with only return the property (in the purchase of the lease, the buyer has a limited time, if any, to cancel the agreement).
The use of rent-to-own transactions began in the UK and Europe, and first appeared in the United States during the 1950s and 1960s. While lease-to-own terminology is most often associated with consumer goods transactions, the term is sometimes used in conjunction with real estate transactions.
Video Rent-to-own
Furniture, electronics and appliances
History
The concept of rent-to-own transactions first appeared in the UK and continental European countries with rental purchase models. One of the first rent-to-own retail stores established in the UK was Lotus Radio, which began operating as a radio rental business in 1933. In the United States, retail-to-own rental business practices began to grow. in the 1950s and 1960s. Individuals cited as key figures in the history of transactions and rental-to-own applications as business models include Charles Loudermilk, Sr., who in 1955 began to lease an Army surplus seat and later founded Aaron Rents, and J. Ernest Talley, who started Mr. Rental T in Wichita, Kansas in 1963, and later helped establish the Rent-A-Center.
In response to the growing desire to share information, develop uniform practices and procedures and foster a positive public image in a growing lease for its own industry in the United States, lease to its own dealership formed the trade association - Progressive Rental Organization Association (APRO) in 1980. The association started with about 40 original member companies and selected the initial council of 16. The association currently has approximately 350 member companies representing approximately 10,400 stores in all 50 states, Mexico and Canada. Rents to have served 4.8 million subscribers at any given time of the year.
Transaction structure
Lease-to-own agreements are based on weekly or monthly lease periods. In this type of transaction structure, the consumer (lessee) - at the end of each week or month - may choose to renew the lease on a weekly or monthly basis by making an extension payment, or to terminate the agreement with no more liability by returning the real property. While it is not mandatory to do so, consumers may choose to continue making interval payments on merchandise for a predetermined period of time, at which point they will have a good one directly. An alternative purchase option is usually provided for, enabling the consumer to pay off the remaining balance on the agreement at any time to gain permanent ownership.
According to a Federal Trade Commission survey on the rent-to-own industry in the United States conducted in 2000, consumers reported that they chose to engage in rent-to-own transactions for various reasons, including "lack of check credits," "ability to earn their merchandise otherwise can not ", and" convenience and flexibility of the transaction ". The most common reason cited for dissatisfaction in surveys is the high price. In addition, some survey respondents reported poor treatment by employees in respect of late rents, problems with repair services, and hidden or additional fees.
Costs incurred by consumers in lease-to-own transactions have been the subject of long-term debates and different opinions. Historically, consumer advocates, some US state attorneys and some academic researchers have expressed concern that consumers entering lease-to-own agreements may not be aware of the potentially huge long-term rent-for-own costs compared to traditional installments or plans layaway. Often mentioned alongside most critics is the question of whether the price paid for this type of service is sufficient for low-income individuals who can not afford to pay additional financial expenses. At the same time, academic researchers and other industry associations argue that lease-to-own transactions are not comparable to traditional methods of purchasing or financing consumer goods, where they include services such as delivery, assembly, service and repair, all of which is calculated into the higher rated value and the appropriate price is charged. Also often noted by proponents of the unique nature of rent-to-own transactions is the point that they are not obliged to buy, because the agreement may be terminated by the tenant at any time by return of the property. A study conducted by the University of Massachusetts Dartmouth in 2003 found that 90% of leased merchandise alone was returned with less than 36% of scheduled weekly payments, indicating that this type of transaction "is more often used for short-term needs rather than as a method of acquisition. "
Rent versus sales
The legal controversy surrounding rent-to-own transactions primarily centers on the question of whether transactions should be treated as leases or credit sales. The industry believes that the transaction is a lease; while consumer advocacy groups recommend that transactions be treated as credit sales. In 2011, forty-seven US states, Guam, Puerto Rico and the District of Columbia have passed laws that characterize transactions as rent. Of the five US state supreme courts that have answered the question, three (Massachusetts, Arkansas, and Maine) concluded that the transaction was rent. New Jersey and Minnesota concluded that it was a credit sale under the credit laws of those countries. The federal district court in Wisconsin also found a transaction to be a credit sale under Wisconsin state law.
In 2011, there was no US federal consumer protection law specifically dealing with rent-to-own transactions, but through litigation efforts were made in an attempt to bring a lease-to-own agreement under the definition of "credit sales" in the Truth in Lending Acts. However, the court has not, in 2011, decided to support this change at the federal level. In 2006, the US Department of Defense labeled rent-to-own a predatory lending practice, defined it as "unfair or rude credit or credit lending practices or credit collection," along with payday loans, title loans, anticipated loan repayments and practices other similar. In 2007, the United States Government Accountability Office raised concerns with the methodology and structure of this study. Later that same year, the Department of Defense finally concluded that rent-to-own is not a form of credit and excludes it from its rules on predatory lending practices.
Practice collection
Consumer advocates and plaintiffs who testify in the legal process sometimes allege that the rental shop itself routinely withdraws the merchandise when the consumer approaches ownership. At the time of the 2000 FTC survey, people involved in lease-to-own transactions reported "low incidents of late repossessions," which the FTC may recommend because of the mandated restoration rights in most countries, -this allow consumers to return this type of contract after repossession.
Maps Rent-to-own
Real estate
While lease-to-own transactions are most commonly used to purchase consumer goods at retail stores, the term also describes specific real estate agreements. The option of rent-to-own housing is usually done more often during the decline of the housing market, such as the financial crisis of the late 2000s (decades). As the latest housing market slump is accompanied by regulatory oversight that protects from lending practices and consumer credit agencies, obtaining loans becomes more difficult for Subprime borrowers. Some argue that rental of residential homes can become a new normal, while proponents of rent-to-own real estate agreements argue otherwise.
Incorrect credit score
Tenants/buyers who have an imperfect credit score are usually interested in their own rental properties because lease terms allow them to stay home while they take the necessary steps to repair their credit and get a mortgage. Most rental purchase agreements allow them to lock the market level when they sign a contract. People with bad credit find the lease period is an important opportunity to improve their financial profile to get a loan. Common complaints/buyers have lease-to-own agreements, however, stemming from their inability to get loans in time to purchase property, either due to lack of advance payment or credit, at which point they must restructure the agreement or be forced to leave.
Transaction structure
In rent-to-own transactions, the tenant resides in the real property and pays to buy the property for a fixed price within a certain period of time, usually one to three years. As part of the contract, the lessee may be required to make a non-refundable deposit that is often included as part of the down payment at the end of the lease term. In addition to monthly rentals, often additional amounts are called rent credits paid into an escrow account during the rental period. This amount is added to the deposit and is used as part of the down payment at the end of the lease term. This drives rent above the market level but helps build savings for purchases if a buy option is taken. At the end of the lease term, the tenant is offered the right of first refusal to purchase the property at an agreed sale price, or leave and lose the deposit. If the lessee is unable or unwilling to use the option to purchase, the owner is then free to rent or sell the property to other buyers, or to restructure the contract.
Fraud
Since rent-to-own real estate contracts are flexible open source documents, there is scope for scammers to make use of unattended tenants. Rent-to-own proponents recommend consultations licensed realtors and/or real estate attorneys for every step across your transactions for your safety.
See also
- Alternative financial services
- Closed rentals
- Buy purchase
- Car rental
References
External links
- "From Poverty, Opportunity: Putting the Market to Work for Low Income Families". Brookings Institute. July 2006.
Source of the article : Wikipedia
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