RTO Sellers Need To Pay Special Attention To Paperwork And Procedure

Posted by Alan Zunec on Wednesday, February 20th, 2013 at 6:15pm.

Rent-to-own, or RTO, is an alternative way to sell real estate which can benefit both the buyer and the seller. But things can and do go wrong if procedures aren’t followed and the paperwork is less than stellar.

One recent incident occurred in Kelowna. A couple ended up moving to Alberta and listed their home with Kelowna Home Deals, a RTO firm. To date they have yet to receive any money either from the tenant or the buyer. That means the couple, now paying on a home in Alberta, must now also carry the mortgage on the Kelowna home. Together that is costing them $4,400 per month, and they’ve been paying this since September of 2012.

When they investigated they found that the owner of Kelowna Home Deals, Dell Burnett drew up a tentative contract that gave the Alberta couple an option to purchase their half of the Kelowna duplex. The option gave the RTO firm the option to transfer the contract to a prospective buyer. In October, Burnett found a buyer but kept the contract tentative. There was no solid deal and the prospective buyer, though she moved in, never paid any money.

If you are considering a RTO firm, it pays to do your homework. Make sure the firm is actually buying your home, rather that putting together the option style of agreement. Home buyers should also not be charged a fee. It’s best if the seller deals directly with the tenant, eliminating the RTO firm all together.

In this case the paperwork was faulty, and unsigned. The moved-in tenant is officially not considered a tenant meaning that the Residential Tenancy Branch is powerless to help. Now the owners will have to spend additional funds to get the tenant out of their Kelowna property.

RTO partnerships require two separate agreements, one for the lease by the tenant and another for the purchase option, with a pre-set price. Before the tenant moves in, first and last months rent for the lease and the first payment on the option should be collected by the seller.  That way the tenant is really a tenant, and if they fail to pay they can be evicted as stated in the rental lease agreement.

Leave a Comment