Mayor Brandon Johnson is attacking a rent-to-own player’s business model as unfair to low-income households on the city’s South Side in a new lawsuit filed Wednesday in Cook County.
Chicago is taking aim at a series of companies it accuses of preying on people by “[engaging] in a nationwide scheme that takes advantage of low-income consumers” with their rent-to-own properties.
The companies targeted by the litigation operated under two main entities: Vision Property Management LLC, and FTE Networks.
“Egregiously, Defendants’ scheme has targeted predominantly Black communities on the South Side of Chicago, in many instances buying up homes in the same historically underserved neighborhoods that the City has prioritized for equitable investment and neighborhood revitalization through its INVEST South/West initiative,” the suit said.
FTE, however, said it has abandoned the business practices that are subject of the complaint, and that they had been used by a previous iteration of Vision that FTE and its subsidiary US Home Rentals took over.
“The alleged practices referenced in this complaint notably occurred prior to FTE’s acquisition of Vision’s portfolio, and are inconsistent with FTE’s deep commitment to operating a home rental business that is trusted to provide safe and affordable housing nationwide,” a spokesperson for FTE said.
The suit claims the defendants are in violation of city code and the Chicago Landlord-Tenant Ordinance. It alleges the companies purchased foreclosed homes at a steep discount with severe defects, then rented them to consumers without fixing those defects.
The companies initially offered what were called “Agreements for Deed,” which allow the renter to receive legal title to the property after 20 to 30 years of payments. In 2013, the state began more heavily regulating that industry, so the companies moved to agreements called “Lease with Option to Purchase.”
However, the leases required the consumers to take on homeownership responsibilities like repairs, taxes, insurance, and utility bills while not accruing equity in the property. When residents didn’t cover such costs, dozens of households were evicted by the affiliates of Vision and FTE, the suit claims. Two parties of the 13 named as defendants in the suit that the city says are LLCs connected to Vision and FTE have filed at least 60 eviction suits since 2015.
And when the companies decline to pay property taxes and the residents don’t either, the properties are sold off through public auctions to third parties in many cases, removing the prospects of homeownership for the tenants, the litigation said.
“Defendants cannot have it both ways,” the suit said. “If [Vision’s and FTE’s] contracts are mortgages, then [they] must provide residents with additional protections that apply to mortgagors. Defendants fail to do so. If [their] contracts are rental agreements, then Defendants must maintain habitable properties. Defendants fail to do that either.”
One of the affiliates has forfeited at least nine Chicago properties at the Cook County tax sale and is at risk of losing another eight due to unpaid taxes, while another affiliate has 12 properties that are delinquent on taxes and risks losing them, the suit said. Other affiliates named as defendants have similar records of late tax payments.
The companies in question were the subject of a 2016 New York Times story about the rent-to-own industry, in which experts said the “deals are risky, lack consumer protections and may not be enforceable in some states.”
In a statement about Chicago’s suit, Johnson said those who take advantage of Chicagoans will be “held to account.”
“Chicagoans trying desperately to achieve the American dream of homeownership should never, ever be subject to predatory behavior from unscrupulous firms like these,” the mayor said. “Under my administration, we will not tolerate our Black and Brown communities to be further exploited.”
The city is seeking a jury trial.
This story has been updated to add a statement from FTE Networks provided by the firm after initial publication.
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