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End of rent-to-own?

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Guest | 09 Jul 2013, 02:33 AM Agree 0

The viability of the rent-to-own market took another hit last week following news that an Ottawa-based company is facing $2 million in lawsuits from unhappy investors. Golden Oaks Enterprises, the company at the centre of the scandal, had reportedly promised high returns in exchange for mortgageing cash and investing in the property.
“Stories like these do scare buyers from this market,” says Deepak Bansal. “From my own experience, there have been a lot of bad rent-to-own developments and this is just another.  There are some good obviously, but the risks and costs in general are too high for many.”
Elizabeth Kelly, VP of Sandstone Management Inc, says all industries have “bad apples” and as with all home purchases, buyers need to carry out substantive research and due diligence beforehand. The same applies to property investors considering this platform as a way of diversifying their portfolios.
Still, much of the criticism of rent-to-own is focused on the buyer/renter. Those agreements are increasingly touted as a good alternative for those who cannot afford a down payment or have poor credit ratings or are unable to qualify for a high-ratio mortgage under the new mortgage rules, introduced one year ago.
“The main flaw in this market is how some developers are valuing the property once the rent-to-own term has finished,” warns Bansal. “I am aware of some cases where, for example, after three years of paying into the fund, the developer turns around and says the property’s value has gone up by 20,000 to 30,000.”
Kelly, however, says such cases only arise when legal issues are not ironed out from the start.
“Education and communication is central in rent-to-own, especially when it comes to the application process,” she says. “The only problems I have seen with regards to this market are when people sign up for a rent-to-own informally and no agreements are in place.”
  • Daniel | 09 Jul 2013, 08:36 PM Agree 0
    OK... where is the rest? With a strong headline like that, I expect an article with lots of meat in it. Where's the rest? Is that it?
  • Claire Drage | 09 Jul 2013, 09:05 PM Agree 0
    I couldnt agree with you more Elizabeth... there are some bad apples out there which tend to tarnish the RTO market as a whole. RTO is a great viable solution for home ownership that can work for both the tenant-buyer as well as the investor. However, the success is based on the due deligence up front as well as the follow up and action plan completion for the tenant buyer. Without ensuring the tenant buyer can execute on the option agreement at the end of the rent to own can lead to alot of unhappy people - investor and tenant alike! Set up the right way from the beginning to exit strategy, Rent to Own does work!
  • Sukhjeet Singh | 09 Jul 2013, 09:17 PM Agree 0
    Being part of a company that has setup one of the few Rent-to-Own investment companies in Montreal, Quebec, I really despise these "bad apple" companies that pop-up and give a bad name to a strategy, when done properly, makes the deal a “win-win” situation for both investor and client. Through the many deals that we have put together, the main thing is to educate both the investor and client and make sure everything is documented in the contracts before the deal is finalized. With the legal and language difference in Quebec, we have spoken to the Regie Du Logement (rental board), the Autorité des marchés financiers (Quebec securities and exchange commission), and multiple Notaries to make sure our deals are structured to help both our investors and clients. Our main priority is ethical and safe investments using the Rent-to-Own model.
  • Ron Geddert | 10 Jul 2013, 08:41 AM Agree 0
    Unfortunately, there are too many stories like this out there, and it only takes one bad apple to wreck it for a hundred good operators. I am a rent-to-own operator, and regular run into skeptical people who have heard bad stories. It really hurts the majority of us who operate ethically and professionally.

    That's why a bunch of us started CAROP, the Canadian Association of Rent to Own Professionals ( We not only screen applicants and make them sign on a code of conduct, but have the authority to audit deals that draw complaints, as well as expel them from membership.

    We urge the public not to deal with rent to own operators who are not members of a professional association. And we urge ethical rent to own operators to join our association and enhance it so that it will be recognized as the official voice of the industry.

    Ron Geddert, president, CAROP
  • Calvin Angela Mackay | 10 Jul 2013, 09:35 PM Agree 0
    If a rent to own deal is put together by a professional company with all the legal documents it place, it can definitely produce a win/win situation. Our Company, Cal-mac Rent 2 Own, in Red Deer, AB operates as a member of the Canadian Association of Rent to Own Professionals. This Association was set up to give credibility to our members and provide the public with peace of mind knowing they are dealing with a reputable company. I urge both rent to own providers and those wanting to participate in a program to check our the Association at
  • Jon Simcoe | 11 Jul 2013, 02:35 AM Agree 0
    Becoming a member with CAROP was the best way to prove to investor and renters that I operate a ethical business only interested in win-win outcomes. I urge anyone who puts these opportunities together to become a member. This is a way for investors to continue to receive high returns with ethical companies and for renters to verify that thy are dealing with an honest company.
  • Jeff Reisner | 11 Jul 2013, 03:42 PM Agree 0
    This seems to be nothing more than an article written by someone who is unfamiliar with how RTO works and the "Positive" effect it can and does have in the economy. This issue is clearly related to the dishonest business practices of the firm doing these Sandwich leases and has nothing to do with RTO...yet because our society likes to attack concepts they don't truly understand...RTO is getting the blame for this debacle...very unfair and biased reporting...
  • Matthew Wiltzen | 15 Jul 2013, 09:57 PM Agree 0
    I agree with Daniel,

    Barely half a page and you call this a news story? End to Rent To Own? How? Mortgage Brokers applying more scrutiny? How? Who? Where? Why?

    You don't answer any of the statements in your headlines.

    Very lame article for such a bold headline. False advertising in my opinion.
  • Paul N. | 18 Jul 2013, 08:09 PM Agree 0
    This article is doing the general public and the real estate industry a great disservice. I am very disappointed with this article. It has no supporting information on several bold statements and appears to be written for the sole purpose of catching negative attention and bashing Rent to Own programs and companies. I am the owner of a Rent to Own company and we pride ourselves in helping people achieve their dream of homeownership. Most of our clients would be stuck in the renting cycle for years and years if it were not for companies with dignity and integrity like ours. Yes... Rent to Own deals have had a bad reputation and as with any type of business, there are some bad apples... but there are many MANY people in Canada who would not be proud and happy homeowners if it weren't for (usually small) hard working businesses like ours that focus on helping people and building a stronger community.. not the bottom line.
    If you want to publish an interesting article about Rent to Own, filled with accurate and informative information that will help investors AND potential tenant buyers mare educated decisions, feel free to contact me and I would be happy to write one.
  • steveD | 24 Oct 2013, 09:59 PM Agree 0
    Rent to own is a major investment strategy and provides a valuable route onto the property ladder for those who may find it difficult to raise the initial deposit. So get rid of it, why, says who, wheres the logic in that... just no meat on this bold statement!
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