Landlord Keeps Rent From Rent To Own Home

Added January 19, 2009 by Ilyce R. Glink

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Summary: Renting a rent to own home may seem like a good option if you lack money for a down payment. But what happens if you don't end up buying the rent to own home? Does the landlord get to keep all the rent you've paid toward the rent to own home until that point? Yes. It's up to the landlord to apply the rent as a down payment if and when you buy the rent to own home.

Q: I have been reading about rent to own options for buying a house. Through research many of my questions have been answered except for one: If the renter is not able to purchase the home, what happens to the money that the landlord has saved from rent payments? Thank you.

A: When it comes to a "rent to own" or "lease/option" property, your rent money is your rent money. That's the money you pay to live there each month. The holdback provision (the portion of your rent that the landlord agrees to apply toward your down payment) only kicks in if you actually purchase the property. It's not a real set-aside, as with a mortgage or insurance escrow.

If you don't buy the property, all of your rent money, plus any non-refundable option fee you agreed to pay, stays in the landlord's pocket. You can check with an attorney in your state to see if there are any specific provisions that would require the landlord to return that money to you.

But a properly drafted rent to own document would provide for the payment of rent to the owner of the home and only in the event the renter decides to purchase the home should any of the collected rent apply to the purchase of the home.

Jan. 19, 2009.

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