One of the interesting trends in home ownership is the shift towards more and more rental items being present in the home. It’s the same trend you’ll notice in other areas, whether it be the software you use (Office365 for example) or the concept of leasing a car vs. buying or financing one. The attractive, seemingly lower monthly payments, versus the hard cost of ponying up all that cash for a outright purchase.
A household name in residential HVAC (btw if you like puns you’re going to LOVE following this blog) is Reliance home comfort (www.reliancehomecomfort.com) and they list several benefits to rental programs here: https://reliancehomecomfort.com/learning-resources-rental-program/
If you hate numbers skip the next paragraph, seriously.
I’m going to use totally made up numbers for easy math .. say a $12,000 furnace generally lasts 10 years and costs a company let’s say half that, $6,000. So they make $6,000 of you every 10 years. BUT they rent you that furnace instead for say.. $100 a month. The money you pay is the same, but you don’t have to spend that all upfront – score! The benefit to the company renting is generally that the raw $$’s work out more in their favour BUT the real kicker is they bake the cost of maintenance into that rental price so instead of 10 years the furnace lasts 12.. 15.. or 20 years.. every year above and beyond our fictional 10 year life expectancy is pure profit.
Ok, no more math you can keep reading now.
Traditionally in Southern Ontario, home owners have only thought to ask about or assume the more traditional rentals: hot water heaters, alarm systems and perhaps satellite dishes or other extraneous equipment.
A more comprehensive list of items to make sure you ask about:
- Air Conditioning / Furnace / other HVAC
- These large ticket purchases have recently seen a rise in rental agreements .. just because the listing says “NEW FURNACE!!” do the diligence and make sure your REALTOR® confirms that they are owned outright
- Solar Panels
- Newer technologies are often more expensive because they haven’t reached economies-of-scale making them financially available for the masses, rental programs ease that burden to consumers by spreading it out over a longer period of time – a close friend of mine had to walk away from a deal because the solar panels on the house came with an undesirable rental contract
- Ok, seriously I just wanted to make sure you were reading .. I’ve never heard of windows being a rental item – just to be clear that would be absolutely ridiculous!
- Other equipment on the property
- More so in commercial or rural areas, are their fixtures or equipment that others are paying the property owner to rent (either the item or the space for the item)
- Billboards placed along major transit routes
- You may have an obligation to assume and maintain the advertising medium
So you can see, it can go both ways. In all scenarios you need to know exactly what you’re getting into and a diligent REALTOR® will always strive to provide you with a complete and accurate representation of the state of all such rentals. Even so, do yourself a favour and ask the questions!
Once you have a list of all the items that are currently rental items, identify which are assumable and of those, which you want to assume. If the rental agreement for a particular item (the solar panels in my example above) has an unfavourable clause given the renting company an over-reach of authority, it might be in your best interest to request the seller dissolve the rental agreement in advance of your closing. If you’re unsure about the terms of any of the rental items, ensure your lawyer reviews each of the agreements and helps explain the pros and cons. Remember, everything in a real estate transaction is negotiable and diligence is key to ensuring you get an equitable deal.
One last piece of advice on rental items: If you are assuming a rental contract, ensure that you request recent copies of the latest bills for the accounts. You may not always get them (which would be a warning sign on its own) but what you want to try to do is verify that the accounts are all in good standing and not in arrears. The last thing you want is a collection company showing up on closing day to remove something you were intending on taking over!
Join the discussion over on Facebook – would love to know what your oddest rental item was!