Association of Progressive Rental Organizations

Legal Article

RTO in the House?

RTO is in the news these days. The good news is that this time, it is not about us. RTO stands for all sorts of things on the Internet, including: Regenerative Thermal Oxidizers; Regional Transport Office; Resident Technical Officer; Real Time Objectives; Regional Tax Office; Return To Office, and many more. This time, the news is about the “rent-to-own housing.”

RTO housing, a concept very different from our business, has been championed by some as a creative way to increase homeownership. The Canadian government is considering an investment of tens of millions of Loonies in RTO housing.

RTO housing transactions appeal to would-be homeowners who, for any number of reasons, are unwilling or unable to close on a real estate deal at the moment. They might not have the required down payment. They might not have a credit score that qualifies them for the mortgage to buy the desired dwelling. Or they might not know whether this is really the house for them, and they want to “try it before they buy it.”

An RTO house deal is really two separate deals. It is a lease for the house – anywhere from one to five years – and there is also an option contract, usually giving the tenant the option, but not the obligation, to purchase the house at a later date, often once the lease expires.

The tenant/buyer may have to pay for the purchase option upfront, maybe 3-5% percent of the purchase price. Then the lease payments often will include a premium over market rental rates, which accumulates in the tenant’s favor and can apply toward the purchase price down the road.

There is no one way to do RTO housing deals, and issues abound. Will the parties fix the purchase price on day one of the lease or will they wait until the lease expires to negotiate it, perhaps via an appraisal(s)? Will any portion of the lease payments apply to reduce the purchase price of the house? Who is in charge of maintenance and which kinds are covered during the lease term? There is a huge pecuniary difference between keeping the grass mowed and replacing the roof. What kind of insurance is required and who pays for it? All of these questions and more must be answered, finally, in the written documents relating to the RTO transaction, and every deal is a little different.

The idea behind many RTO house deals is that while the would-be buyer would not qualify for a mortgage today, in a couple of years, with the chance to build up some down-payment money through higher-than-market rent payments and disciplined payment of bills as they become due to raise credit scores, in 2-5 years, it’s realistic to suppose the tenant will be able to qualify for that mortgage. That’s the theory underlying RTO housing, anyway.

With real estate prices recently escalating rapidly in many markets, an RTO deal for a house might make more sense than ever, especially if the tenant can lock in a price for the property today and enjoy the escalation in values while renting.

Consumer advocates, while urging caution, acknowledge that RTO housing can lead to more people owning their own homes, which is generally seen as a good thing for society. Our friends representing consumers are going to have to be careful not to appear hypocritical by praising RTO housing while condemning the TV, appliance, and furniture RTO business.

Ed Winn III serves as APRO General Counsel. For legal advice, members in good standing can email legal@rtohq.org.


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Mike Lewis

Mike Lewis is a Premier Rental Purchase franchisee with multiple stores and currently serves as Vice President of Operations. With 33 years of experience in the rent-to-own industry, he has spent the past 20 years working closely with franchisee owners and previously spent 12 years in Corporate RTO, gaining a strong foundation in the business.

For the past five years, Mike has been sharing his knowledge by teaching managers and franchisees at the company’s Training Center.

Outside of work, he enjoys time with his family, kids, and grandkids, and appreciates the simple things in life – especially riding his Harley Davidson with the sun on his face. If you know, you know!

Lauren Talicska

Arona Corporation dba Arona Home Essentials

Lauren Talicska is an experienced multi-channel marketing specialist and the Vice President of Marketing & Communications at Arona Home Essentials. She has found her home in the RTO community, supporting stores in branding, growth, and increasing traffic.

You may recognize Lauren as a former RTO vendor, including her time as a partner for Nationwide RentDirect, or her previous participation in the APRO Vendor Advisory Committee. Lauren calls Columbus, Ohio, home and spends her workday crafting and executing marketing promotions from inception to realization, all while supporting the branding and social media needs of all the Arona stores in 12 states (plus Puerto Rico!).

Charles Smitherman

APRO

Charles Smitherman, JD, PhD, CAE, became CEO of APRO in 2023, bringing years of legal and executive experience in the rent-to-own industry. 

Prior to joining the association, Charles served as COO, General Counsel, and Vice President of PTS Financial Services, where he played an active role in the rent-to-own industry by representing his company through PTS’s club program offering with APRO member dealers. Charles is an attorney with two decades of experience across a wide variety of areas, including RTO, consumer financial services, antitrust, corporate law, mergers and acquisitions, litigation, franchise law, and privacy law. Following law school at the University of Georgia, Charles earned a Master of Legal Studies and PhD in Law from the University of Oxford in England.

Charles is credentialed as a Certified Association Executive (CAE) with the American Society of Association Executives, a Certified Franchise Executive (CFE) with the International Franchise Association, and a Certified Information Privacy Professional (CIPP/US) and Certified Information Privacy Manager (CIPM) through the International Association of Privacy Professionals. As APRO’s sixth CEO in its 45-year history, he brings a collaborative, member-focused approach to association leadership, emphasizing transparency, advocacy, and value creation. Outside of work, Charles is an active ultra runner and open water swimmer.

Mike Kays

Ashley Furniture Industries

As VP of Rental Sales for Ashley Furniture Industries, Mike thrives on building relationships with our RTO industry veterans, and helping businesses grow through new product, new marketing, and new supply chain options.

Mike works to leverage a wide breadth of relationships and influence, intimate knowledge of market trends, and unique knowledge of what RTO dealers need from a supplier to be successful.

The saying goes that a high tide raises all boats, and our goal is to leverage the world’s largest furniture manufacturer to drive the continued growth of the RTO industry and all the suppliers.

Mike Tissot

Countryside Rentals Inc., dba Rent-2-Own

Mike grew up in the rent-to-own industry under the guidance of his father, former APRO President and RTO legend Darrell Tissot. For nearly 25 years, Mike’s innovative leadership has helped expand the family business to more than 40 stores across Ohio and Kentucky while also shaping the industry as a whole.

He has served as President of the Ohio Rental Dealers Association, an APRO board member and Treasurer, and President and Treasurer of the TRIB Group. His contributions have earned him the APRO President’s Award of Excellence and the title of APRO Rental Dealer of the Year.

Outside of RTO, Mike enjoys time at the lake house or in Orange Beach, Alabama, with his girlfriend, Angela Strong McCool. A passionate Cincinnati Reds fan, he rarely misses a game, whether watching or listening alongside his parents. He also takes every opportunity to visit Arizona, where his daughter is currently attending Arizona State University.