Feature, V1I3

Rent-To-Own (Part 1)

“Storage of property is a big business. We are a society that accumulates our possessions and typically need some place to store that property during different phases of our lives (renovations, military, job relocation, death, etc.). Whether it’s renting a portable storage unit or a self-storage unit, the need for the service is clear,” says attorney Scott Zucker, a partner with the Atlanta law firm of Weissman Zucker Euster Morochnik PC, who addressed attendees of the Inside Self-Storage World Expo this past April in Las Vegas.

Because not every person in need of additional storage can afford to buy it outright, or maybe suffers from poor credit, the shed building industry came up with a financing method that allowed them to serve those customers, anyway.

At least that’s how Scott Strahm owner of BLI Rentals LLC, a 13-year veteran of the shed rental industry, sees it. “Banks wouldn’t come right out to tell you” but they require a larger down payment or a higher credit score for people who wanted to buy a shed, he says.

So the shed industry adopted a RentTo-Own (RTO) strategy that allowed more shed builders to move their products while paving the way for people to have personal sheds on their property.

But just what does RTO mean? How can a person with a lessthan-stellar credit history get to have a shed on their property? What happens to the building if the client does not make their monthly payments? Do laws exist that protect consumers from potentially unscrupulous business owners and vice versa?

In a two-part article, Shed Builder Magazine will introduce you to experts in the shed industry, including lessors, builders and even an attorney considered to be The Wizard of RTO.

Elements of an RTO Shed Transaction

Although each shed-renting company offers agreements that vary in length, the one commonality is that an RTO transaction is neither a lease, nor a contract to buy. An important characteristic of an RTO agreement is that it clarifies the shed may be returned at any time during the length of the rental period, for any reason. The owner of the shed, usually a bank or an RTO company like BLI Rentals, must accept the shed if the customer does not want the agreement between the parties to continue. Depending on state law, the shed owner may or may not be able to sue the renter for monies left unpaid under the agreement, according to Matthew Weaver, office manager of Cherokee Rentals in Williston, South Carolina.

“We rent to a customer for one month and after that month, the customer can rent for another month by paying” the rent listed in the agreement between the parties, says Weaver. In essence, the customer “can renew up to 35 additional times. If they do, they get to keep the shed,” he says.

Meanwhile, the length of an RTO agreement varies, depending on the desires of the shed owner prior to the transaction. For example, Charles P. Wilson, chairman and CEO of the McKenzie Banking Co. in McKenzie, Tennessee, says his bank’s shed rental agreements last between 24 to 60 months. Conversely, Strahm’s rental agreements last between 12 to 60 months.

In other words, it isn’t proper for a lessor to accept a first and last month’s rent payment at the inception of the agreement. Why? Because doing so would make the transaction seem more like a loan rather than a month-to-month agreement.

Since the shed can be returned at any time without penalty, it isn’t appropriate to accept payments for future months, he says. However, to sidestep this obstacle, Weaver’s company “takes an initial payment equal to two month’s rent,” he says.

Bad Credit? No Worries

One of the most attractive aspects of the RTO shed industry for consumers is that lessors and builders do not make a formal inquiry into a renter’s credit history. Potential renters are not required to provide personal information such as social security numbers or paycheck stubs in order to rent a shed.

There is “no state law we are aware of that we have to make a credit check,” says Wilson.

But that doesn’t mean lessors and other companies renting sheds will rent one to just anybody. According to Barry Rauhauser, owner of York, Pennsylvania-based RTO of America LLC, there are things shed owners can do to learn more about the customer, even if neither party knows one another. For example, Rauhauser asks the interested customer where they live, how long they have lived there, and where the applicant is employed.

RTO of America LLC

One inquiry that can’t be made of the applicant is how much they earn, says Rauhauser. “If I have reservations (about the customer), I call the dealer to ask their opinion about the person,” he says.

Customers are also usually required to pay a deposit on their shed rental at the onset of the transaction. According to Strahm, the deposit amount varies depending on the length of the agreement. “The shorter the agreement, the smaller the deposit,” he says. Conversely, the longer the rental term, which makes monthly payments smaller, the larger the deposit.

Rauhauser’s rental agreements run 12 to 60 months and he requires both a 10 percent deposit and first month’s rent to initiate the transaction, he explains.

When Wilson’s bank rents a shed, the customer can pay off the entire balance due early without penalty. If that happens, the renter gains a new title: Owner.

That’s a philosophy Strahm also emphasizes. “We focus on ownership and value the power of ownership,” he says.


In fact, his company places so much emphasis on trying to help people transform themselves from “renters” to “owners” that his staffers have created a unique way to mark the moment. “We ring a cowbell. That happens many times a day,” says Strahm proudly.

As a way of demonstrating their commitment to ownership, Cherokee Rentals’ monthly invoices include a payoff figure. “We encourage renters to buy a shed at any time,” says Weaver.

 What Happens When a Renter Doesn’t Pay Up

Just because a shed lessor or a builder does not take a security interest in the structure when it is rented does not mean they can’t take it back if the renter doesn’t make their monthly payment. However, every company has its own methods for what is called “retrieving” a shed if payments are late or non-existent.

Strahm’s company works by the philosophy that being proactive, rather than reactive, is the right way to decrease the need to retrieve a shed for non-payment.

“We communicate with a customer long before they become delinquent,” he says.

Cherokee Rentals’ rental agreement spells out what happens if payments aren’t made according to the signed contract.

“As part of our contract, if we have a shed on their property, and there is a breach of contract or the contract is annulled in some way, we are permitted to go on the property to pick it up,” says Weaver. However, he says, his haulers, all independent contractors, are instructed not to engage in any violence or threats just to retrieve a shed. “If the renter tells the hauler to leave, they are to leave, even without the shed,” he says. In those rare instances, Weaver might then call upon a private investigator to help with the retrieval.

When a renter misses a payment to Wilson’s bank, they can expect an email from the company or even a personal visit from one of the bank’s officers to discuss the situation.

According to Wilson, 10 percent of his bank’s assets, which translates into roughly $10 to $12 million, are linked to RTO and other shed-related contracts. Of those, an average of eight to 14 percent are 30 days past due, he says.

“If a customer violates a rental agreement, we have the right to retrieve the property,” says Wilson, adding, “generally speaking, we don’t have to have a judgment,” to retrieve the shed for non-payment.

However, the bank can’t breach the peace, cause enough of a problem or disturbance that law enforcement is called, to secure the return of the she d. If the situation warrants, the bank might resort to a legal action called replevin, says Chad P. Wilson, Charles’s son and president of McKenzie Banking Company. Replevin is a law term that means a person is permitted to retrieve an item of personal property, such as a shed (which is not real property, but is personal property) if the person holding the personal property did something to violate that state’s laws that define replevin. That only happens in situations when peaceful attempts to retrieve the shed have failed, and is a last resort, says Chad Wilson.

Read Part 2 Here


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