Who is responsible for repairs & maintenance during “rent to own”?

mobile home university
#1

A few POH tenants approached us to buy the POHs they rent from us, in anticipation of tax refunds. They cannot do a cash buyout, and look for some rent-to-own program. Once they sign a “rent-to-own” contract, is the landlord still responsible for repair and maintenance of that POH? Or is tenant supposed to take over that responsibility when they sign the contract?

For landlord, the advantage to sell POHs is to avoid R&M burden, but that advantage seems to be diminished if landlord will do the same R&M work on POHs on rent-to-own program for a long period of time (possibly 18-24 months), while loose the significant home rent (which, in my park, is about 3x lot rent) forever. With these thoughts in mind, the idea of selling POHs (especially on rent-to-own program if landlord does R&M work until tenants pay off) is not that attractive. Do I miss something here?

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#2

Assuming lease to own contract are allowed/legal:

Lease to own contract should include language making the buyer responsible for repairs. You can find the contracts on line or have your lawyer draw one up. The buyer has responsibilities such as having the property appraised etc. to insure they protect their rights. The advice for lease to own buyers can be found on line. Provide that info to them to protect yourself in the future in the event they default. You will need to be able to easily take the home back, evict the tenant and resell the property if necessary.
A lease to own sale enables a landlord to off load a difficult property to sell and removes the costs of repair in the future. You lose out on the rent but in return receive a cash infusion in the form of a non refundable down payment.
If you use a lawyer you can also make the buyer responsible for your legal costs in the transaction.

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#3

What about home taxes and insurance? Who generally pays for that in a rent credit or ‘RTO’ deal?

#4

Thanks Greg. I see your point, but it seems to me, as long as landlord still owns it, tenant may argue that landlord should maintain because landlord is statutorily required to maintain and keep the home habitable (in most states as far as I’m aware of)—a duty that cannot be carved out by contract. Maybe I am missing something here, but like to hear others’ thoughts on this topic.

#5

As long as landlord owns the home, I would guess it’s going to be landlord that pays tax insurance etc.?

#6

Typically the tenant is responsible for repairs and maintenance on a rent-to-own.
Owner of the home is responsible for taxes and insurance.

#7

I have a friend who add the clause that maintenance is the tenant’s responsibility going forward. But the the park owner with the park owned home is responsible for taxes and insurance. My friend then bills back part of the insurance also. Seems like theirs a lot of flexibility, just need to word it into the agreement

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#8

In most states, you can set those responsibilities in the contract. But beware giving tax and insurance responsibilities to a tenant for a home you own. If they don’t handle them properly, you the owner will be the one with the loss.

#9

All RTO owners should remember that they will ultimately remain legally liable for injuries within the home even if the tenant is responsible for upkeep and repairs. So even if your contact says the tenant has to maintain the home, and months later someone breaks a leg falling through a floor, you the home owner will be the primary target of ensuing litigation. This is why insurance companies charge park owners an additional liability charge for a rental home, even if it’s an RTO

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#10

You can have a lease that says tenants are responsible for maintenance and repair. However, this is only a deterrent. Rent to own means Rent (until owned). Thus, you as the landlord are renting the home and are ultimately responsible. Laws in your state may require that a rental be safe, have a non-leaking roof, be heated, and have working mechanicals. If you fail to provide that, you are liable.

We had a tenant on rent-to-own and he set his thermostat on fire 3 times in one week. On the third occurrence, he called at 2PM in January at 20 degrees and said we needed to fix it. When we said we would have trouble getting to it until the next day, and he called free legal services. The free legal services attorney said we must fix the thermostat within 4 hours or put him into a hotel until fixed or he would file an injunction against us forcing these actions. Further, if somebody died from exposure, we could have been liable for involuntary manslaughter.

Point is, a rent-to-own is the same as a rental until owned.

The RTO contracts allow you to say the tenant is responsible, but if you the landlord fixes it, you bill back the amount. We sometimes tack the repair charge onto the home cost. So if a $10,000 home is sold on RTO, and we put $1,000 in repairs, the home becomes $11,000. We don’t charge the amount upfront, but what would have been a 5 year terms may now be a 5.5 year term until ownership. For simple repairs like broken cabinets, we tell the tenant to fix it on their own.

#11

This is great info. Thanks for sharing Kurt! I have a question regarding the example in this paragraph.
If some gets hurt in the mobile home, and the park only has general liability, but the home itself where the tenant got injured doesnt have insurance for whatever reason, will the park’s GL cover the park owner/home owner in this situation?