There are a lot of what if’s and questions that rise during rent to own negotiations and during the term of the lease agreement. Today I would like to take some time to explain who is responsible for what and when. As I’ve said many times knowledge is the key to successful real estate transactions, so this is a must read and some serious real estate ammunition.
Maintenance and Repairs
One of the biggest controversies in rent to own is who holds the responsibility during the rental period for home maintenance and repairs. Why this is such a controversy is because the answer is, it depends. The reason why the rent to own agreement and legal counsel is so important in this process is because you need to decide ahead of time who holds the responsibility for these things. Generally these things would fall on the current owner but be careful to get this in writing. This is also one of the advantages of rent to own, even though you would lose your down payment you could walk away from a house that’s practically falling apart.
Property Taxes and Homeowners Insurance
Although there may be some confusion on these two items, it is fairly straight forward. The law clearly states that the responsibility for both taxes and insurance belongs to the name on the deed for the house. Even if the rent to own contract states that the buyer will pay the property taxes or insurance the final bill is left with the current owner. However it would be smart for the renter to purchase renters insurance until the time in which they outright own the home.
Real Estate Agent
Unless the buyer has specifically sought out a realtor to help them find a rent to own home the payment of the agent would fall on the current owner. There are several ways the realtor can be paid either as a portion of the excess rent every month, a 1 time fee at signing, or the rare and unlikely event of them getting paid when the renter transitions into the owner.
As you can see as long as you cover your behind in the initial agreement much more of the responsibility falls to the current owner, which is also why the buyer agrees to a non-refundable down payment to offset the amount of risk the seller is assuming. If you have any other questions on who is responsible for what feel free to email us and we’ll get back to you.