A real estate company that operated an option-to-buy rental home sales business is trying to revamp its image after regulators in New York and Pennsylvania accused it of engaging in predatory selling practices.
Vision Property Management firm on Friday removed an obstacle to its operational overhaul by reaching a tentative deal with the New York attorney general and the New York Department of Financial Services.
The deal, which requires federal judge approval, would require Vision to provide $ 600,000 in cash restitution and own title to tenants and their families who currently live in 58 homes the company owns in New York City. . Atalaya Capital Management, a hedge fund that had provided funding to Vision, had previously agreed to pay New York regulators $ 2.77 million in restitution for consumers.
The regulations also prevent any business in which Vision executives have a controlling interest from engaging in residential real estate activity in New York City.
Linda A. Lacewell, the superintendent of the Department of Financial Services, said the agreement “provides restitution to New Yorkers who have fallen victim to Vision’s predatory practices.”
Vision did not respond to requests for comment.
Officials in New York had accused the company of marketing dilapidated homes to tenants, using deceptive rental agreements that required them to make all repairs. Leases promised tenants the ability to buy their homes after seven years, but tenants often ended up being evicted or abandoning homes after making thousands of dollars worth of repairs.
The settlement is a step in helping Vision transform into a more traditional home rental business by effectively merging with another company, FTE Networks. Just before Christmas, Vision agreed to sell its 3,000 homes to FTE in a deal valued by the parties at $ 350 million. Vision executives will join the company as part of the planned merger, according to a regulatory file.
But FTE Networks has had its own problems. Just days before the sale was announced, the U.S. stock exchange NYSE suspended trading in FTE shares and has decided to delist its shares after discovering that the company had engaged in transactions “contrary to the public interest”. And the broker who introduced Vision and FTE to each other was recently charged with fraud by securities regulators.
FTE said in a statement it was “confident that all pending disputes” with Vision would be resolved by March 30. The company said it is appealing the exchange’s decision to delist its shares.
Housing advocates have singled out companies like Vision for warning homebuyers to be wary of option-to-buy rental agreements involving homes in need of renovation. Option-to-purchase rental agreements have become increasingly popular in low-income neighborhoods where it is difficult for borrowers to secure so-called low-value mortgages for homes valued under 100,000. $.
Vision has been the subject of similar lawsuits accusing him of engaging in predatory sales practices in Wisconsin, Ohio and New Jersey. Two years ago, Fannie Mae stopped selling foreclosed homes to Vision and other similar businesses over complaints about the option-to-buy rental business model.
And in Pennsylvania, where Vision owned around 600 homes, Attorney General Josh Shapiro is not rushing to embrace the corporate reorganization. His office filed for a preliminary injunction last month to block the sale until it can ensure residents living in those homes are not harmed by the sale. A Pennsylvania state judge has scheduled a hearing on the motion for next week.
“While I am happy to see Vision Properties publicly committing to no longer engage in these option-to-purchase leases, I will not stop seeking justice for what they did in Pennsylvania.” Shapiro said in a statement. “This business targeted low-income and minority communities, promising a dream of home ownership and delivering only dilapidated and unlivable residences.”
The Vision House sale agreement also has a curious origin. It was negotiated in part by Suneet Singal, who ran several real estate investment trusts and is now dealing with his own regulatory issues. On December 16, four days before Vision and FTE announced their deal, the Securities and Exchange Commission filed a complaint accusing Mr. Singal of defrauding investors in some of the companies he ran.
Mr Singal, who controls 22% of FTE’s shares, said he would “prevail” in the dispute with the SEC
FTE said in its statement that it was not aware of the SEC investigation at the time of the transaction.