I was very excited to be listing a wonderful Victorian era home. Resplendent with original heavy trims and mouldings, hardwood floors and high ceilings, it was a classic. I don't mean for this to read like a real estate ad but, forgive me, the place had "Curb Appeal". As my usual check-list progressed, the sellers informed me the furnace and air conditioner were rentals and explained it thus.."It's just like renting a water heater. If anything goes wrong with it, they will come and fix it. For Free!"
A little nagging feeling came over me the one I call Scam Radar. I have innate scepticism inherited from my mother who has never felt wool on her eye-lids and has been know to engage in loud public disagreements with people much larger than her 5 foot frame. While it used to embarrass my teen-aged self, I have probably turned into my mom- just a teeny little bit.
There I was, about to have the listing papers signed by my clients who have placed their faith in me and I am stymied by the rental furnace and air conditioner. I asked for the contract and took it away with me to study under a high powered microscope to make out the .00010pt font normally reserved for the war measures act when sending top secret messages to heads of state. I'm still not sure if it was even in English.
Next stop, the lawyer's office, where they create small font. My friend and real estate lawyer, Peter, invited me into his office where he too attempted to read this contract. Neither of us could, with any certainty, decipher whether the contract could be terminated or at what cost. There was a vague reference to "at the end of 15 years" but no buy-out amount. Peter wrote a stern letter to the company requesting the buy-out amount and a response asap. To this day, some weeks later, the company has not replied to that letter.
Further digging at my computer revealed this heating company had many complaints against it for unfair business practices, unresolved complaints with the BBB and was being investigated by consumer affairs.
This is how they would operate: Salesmen come to your door usually in the evening with an official looking clip board and vague claim of association with the gas company and ask to see your furnace. Once down there, if the furnace is a little older, they tell the home owner that A) the furnace does not meet current standards, B) the furnace will not last the heating season, or C) The furnace is not energy efficient and you will save money by installing a new high efficiency unit. . Bottom line, you need a new furnace asap. Like a saviour, they offer to install a new high efficiency furnace for a mere $59.00 per month and AC for 59.00/ month and you will never have to worry again. Not only that, you qualify for government rebates of $300.! Thousands of people were duped into renting their heating and cooling equipment tying them to ridiculously expensive and restrictive contracts which seem to run indefinitely. If you do the math, a furnace and AC unit at $119.90 per month, plus the 3.8% annual rental increase written into the contract amounts to one million dollars after 15 years. Ok, math is not my strong point buts it's still $21,600. not counting the annual rent increases. You might ask, well what about the ten day cooling-off period for in-home sales? Another interesting tid-bit I discovered is rental contracts are not covered under the 10 day cool-down consumer protection rules. Besides, the furnace is installed within about twenty minutes after the contract is signed. I wonder if they are that quick to respond to service calls?.
My client, meanwhile, made her own inquiries with the original heating company and was transferred to a different company who apparently bought the contract from the heating company. Confused? Me too!
There was a lien registered against their property by a mortgage trust company which could be paid out for $12,800. and release the home owner from any further obligation.
To put that figure into perspective, I called a few local heating companies and was quoted a purchase price of about $6000. for a high-efficiency furnace and central air- installed.
My clients received three offers on their house and accepted one with the stipulation that they buy out the furnace and air conditioner contract for the purchasers.
Bottom line: home buyers do not want to assume rental contracts for heating and air conditioning and more so lately, water heaters. Purchase your equipment outright from a reputable local contractor and if you cannot pay cash, there are some companies which will finance the purchase.
Guess what I found in the basement of my next new listing?