Don’t open the door to rental sales pitches

Last April 1, the Ontario government passed a law to protect consumers from door-to-door sales agents trying to switch their hot water heaters to another rental supplier.

Sales agents are still knocking on doors. But many have found a more lucrative pursuit than replacing water heaters.

Now, they’re pushing you to replace your furnace and air conditioner under a 10-year lease. While a water heater costs $25 a month to rent, a heating and cooling system can be $150 to $175 a month (plus HST).

Moreover, you won’t own the equipment when the contract ends. You’ll have to pay a buyout fee to take ownership or a removal fee to get it out of your house.

I’ve heard from many readers about rental sales pitches.

Some said they were taken in by deceptive claims at the door and wish they had investigated before signing up. Here are some comments about why they agreed to a deal.

Misrepresentation: “They entered my home under the pretext of inspecting my furnace venting. Since I thought they were with the Ontario government, I assumed I was protected as a consumer and contract terms would be fair and ethical.”

Misleading claims: “They said the savings on my Enbridge gas bill would offset the rental charge of $80 a month. I thought that included furnace and air conditioning, but they made me sign two contracts of $80 each. I missed the ‘each’ because I was distracted by my son.”

Fear-mongering: “They said my furnace qualified for free replacement under a safety recall issued by the government. While I saw rental clauses in the contract, they said it was really not a rental agreement.”

Exaggerated rebate: “They explained that Ontario Power Authority pays their company $1,300 for the new furnace and air conditioning. There was no rental fee and no installation cost.”

The Ontario rebate is only $250 for installing a high-efficiency furnace and $250 to $400 for a central airconditioning system, depending on the efficiency level. The maximum rebate is only $650.

I heard from a man with a homebased business whose accountant advised him to rent equipment. The nondepreciating rental fee would make a nice writeoff.

After signing a lease with Reliance Home Comfort in 2011, he made a surprising discovery while trying to get a second mortgage this year: Reliance had put an $8,500 lien on his property.

No one had told him about the debt registered against his house title, he said. And if he had known, he would not have rented.

“They said it was in the fine print of the contract,” he told me. “They said the bank could ask for an exemption to allow me to refinance.

“But it doesn’t change the fact that the lien is still there. It impacts the amount of equity in my mortgage I can leverage and I never knew.”

Rob Jutras, Reliance’s vice-president of sales and marketing, said a notice of security interest (or lien) is registered against properties in which rental furnaces and air condi- tioners are located. This is outlined in the rental agreement that customers sign.

Registering a lien helps ensure that rented equipment is transferred correctly to new homeowners. It also protects sellers from being held responsible for any charges after the sale, he said.

“If required, we will certainly postpone or otherwise lift the lien for short periods of time to allow for refinancing, if necessary,” Jutras said.

Reliance’s main rival, Enercare, registers a notice of lease of chattel on a property when the rented equipment has a value of $5,000 or more.

“This does not represent a lien or a debt by the homeowner,” said spokesman Jason Frost, “but simply indicates there is equipment installed at the property, which is on lease.”

“Enercare will also attach a copy of the lease, so that the specific equipment and rental terms are known. This registration serves to protect Enercare and the homeowner if and when the homeowner chooses to sell the property.” Ellen’s Advice Leasing a heating and cooling system can be more costly than buying the equipment. You pay for financing and service over a 10-year period, not just for equipment upfront.

Do not succumb to pressure from a salesperson at your door. Do your own research. Furnace leases are not covered under the same law as water heaters. Some agents will say anything to get you to sign up. Find out if you have time to change your mind and cancel without a penalty.

Ask to see the clause in the contract that deals with registering a lien or any other sort of interest on title to your property.

Finally, when buying a house, find out if you will inherit a furnace and air conditioner on lease. This equipment can be expensive to remove, so you might want to adjust the sale price accordingly. Ellen Roseman is holding a fee seminar on financial basics workshop Tuesday, April 5, at Ryerson University’s Chang School, 5:30 to 9:30 p.m., at 297 Victoria St., 7th floor, Toronto. It’s open to everyone who wants to brush up their money management skills. Her column appears Tuesdays in Smart Money.