Institutional Sale Leaseback Peddlers Facing Equitable Mortgage Re-Characterization Threats?

There has recently been an apparent influx of companies entering the real estate market that seek to "institutionalize" the business of "peddling" sale leaseback arrangements that, at least in part, target financially-strapped homeowners, homeowners that are " cash poor" but "equity rich."(1)

The looming question with these arrangements is: Will courts recognize these deals as "true sale-leasebacks," or are they nothing more than disguised equitable mortgages (ie. secured loans), and in some cases, disguised usurious equitable mortgages(2) that are made in violation of the Federal Truth-in-Lending Act, state usury laws, and other consumer protection laws.

Well, there is at least one law firm (I imagine that there may be others), located in Houston, that is apparently going after these types of companies with lawsuits on behalf of Texas homeowners asserting that the arrangements are nothing more than equitable mortgages.(3)

For more, including a summary of the firm's basis for bringing these lawsuits, see Real Estate Fraud Lawsuit Against EasyKnock, Inc. and EK Real Estate Services of NY, LLC.

Editor's Note:

One company that has been targeted by this law firm has apparently taken umbrage at the firm's effort to recharacterize these sale leaseback deals as equitable mortgages, has responded by filing a lawsuit against them for defamation, and has requested a temporary restraining order in connection therewith. This request has subsequently been denied by the court,(4) and a Motion to Dismiss this case is currently pending.(5)

Footnotes:

(1) See, for example:

• Sale-leasebacks increasingly target struggling homowners (Companies like EasyKnock and Invitation Homes look to tap that investment option) (may be behind paywall),
• Real-estate power players and startups are getting ready to buy thousands of homes and lease them back amid a wave of foreclosures (may be behind paywall).

(2) See:

• Sale Leasebacks Or Disguised Usurious Loans; Substance vs. Form,
• Usurious Loans Masquerading As Sale Leasebacks?

(3) Recharacterizing Sale Leasebacks As Equitable Mortgages In Texas.

(4) Memorandum Opinion And Order (Denying Application for Temporary Restraining Order).

See also, Judge Blocks TRO Bid Against Law Firm In Defamation Suit (may be behind paywall).

(5) Defendants' Motion To Dismiss For Failure To State A Claim, Or Alternatively, To Stay Or Abate This Proceeding.