New York homes in on abusive trailer park deals
REGULATORS in the United States have been cracking down on abusive rent-to-own deals, in which people shell out thousands of dollars for run-down homes that they never actually get tobuy.
Authorities are now homing in on similar deals offered by operators of manufactured home communities, otherwise known as trailer parks. The New York attorney-general’s office is expected to announce a settlement that could give hundreds of people who signed rent-to-own leases with a trailer park the right to tear up those deals and recoup any deposits they paid, according to two people briefed on the matter.
The settlement is with eight trailer park operators, including two publicly traded “real estate investment trusts”, that run more than 100 parks from Long Island to upstate New York.
The settlement would end a year-long investigation by the attorney-general’s office, which had received dozens of complaints from renters about misleading sales pitches by park operators, the people said.
Private equity firms and large real estate investors have been looking to buy trailer parks and combine them into larger companies. They are attractive investments because prefabricated homes are relatively cheap to produce and maintain. New manufactured homes often sell for as little as US$70,000 (RM290,899).
One of the companies settling with New York is Sun Communities, which has a market value of US$9 billion and whose shares have soared nearly 1,000 per cent in the past decade. Sun operates more than 300 parks for manufactured homes and recreational vehicles.
Kathy Bonamo was one of the people who complained to the state. She said she and her boyfriend had moved out of a rent-to-own man- ufactured home they were leasing in Calverton for US$1,600 a month because they were tired of paying annual rent increases and had no way to come up with the US$20,000 payment to complete the purchase. Bonamo, 62, said she had to forfeit a US$2,500 deposit.
“It was terrible what they did,” she said. “This is where we were planning to retire.”
Lakewood Park, where Bonamo and her boyfriend were living, is owned by Kingsley Management of Provo, Utah, which operates in a dozen states. The firm is another operator settling with New York, the people said.
The investigation by Barbara Underwood, the New York attorney-general, found that the leases often included clauses that prohibited renters from holding park operators liable for any damage to a home or injuries sustained in the community. Manufactured homes were also rented “as is”, requiring the renter to make all repairs.
The contracts, which typically last seven to 10 years, sometimes referred to rent payments as “mortgage payments”, even though the tenants would take possession of the property only if they made a large payment at the end of the contract.
The state negotiated some of the settlement terms with the New York Housing Association, which represents manufactured-home parks in New York. Mark Glaser, a lawyer for the association, said the group had “cooperated with the attorney general’s office and was pleased to help facilitate a resolution of the issues under review”.
The terms are similar to ones that led a number of state attorneys general, including those in Wisconsin and Pennsylvania, to sue rent-to-own housing firms. Regulators in those states have said the rent-to-own contracts were deceptive.
The rent-to-own home business model has been around for decades, but it gained new currency in the wake of the financial crisis. Firms bought foreclosed homes and marketed them to people who were not able to get mortgages.