Ellsworth firm settles with state on its ‘American Dream’ home ownership plan
Courtesy / Office of Maine Attorney General
Maine Attorney General Aaron M. Frey, who took office on Jan. 8, announced today a settlement with an Ellsworth company investigated by the state under the Maine Unfair Trade Practices Act.
An Ellsworth business has agreed to make changes in its “American Dream Path to Home Ownership Plan” under a settlement announced today by Maine Attorney General Aaron M. Frey.
In a news release sent to Mainebiz, Frey, who took office Jan. 8, said Linnehan Homes entered into a settlement following an investigation brought under Maine’s Unfair Trade Practices Act. The Attorney General’s Office contended that Linnehan Homes made statements that were misleading to consumer and enrolled consumers in the ownership plan who couldn’t afford it and lost money when they left.
Some consumers in the plan believed they were buying a home instead of renting with an option purchase, the release stated.
Linnehan Homes denies that it violated any Maine laws, but agreed to make changes in the plan’s documents and promotional statements to address the attorney general’s concerns.
According to the Attorney General’s Office, the changes include:
- Using language and disclosures to clearly inform consumers that they will be renting a home with an option to purchase if they enroll in the plan.
- Giving consumers at least a week to review the plan documents before they sign them.
- Refunding 50% of all option payments paid by the consumer, less amounts owed by the consumer, if the consumer leaves the plan within the first 24 months.
Linnehan Homes has also agreed to reimburse some consumers part of their option payments.
“This rent-to-own plan is a big commitment, and consumers can lose a lot of money if they can’t afford it or if they have to move after several years,” said Frey. “Consumers who are considering Linnehan Homes’ Plan should consult with an attorney before enrolling.”
In the news release, Frey expressed his appreciation “for Linnehan Homes’ cooperation in working with his office to reach a resolution that will benefit consumers.”
Hiatus on home ownership plan
On the company’s website, Linnehan Homes President John Linnehan said: “Currently, we are not doing any Path to Home Ownership Plans. We are selling homes on the MLS. I’m focusing most of my time on my Ministries and family activities for the next few months. We plan on starting back up mid-winter, after New Year’s. Please keep checking our website, LinnehanHomes.com, for updates on the Path to Home Ownership Plan.”
According to the Attorney General’s Office, under the plan, Linnehan Homes offered to rent homes, with a separate option to purchase, to consumers who can’t obtain a mortgage from a traditional lender because of low credit scores or inadequate credit history. A consumer who enrolled in the plan signed a lease agreement to rent the home, as well as a four-year renewable option agreement that required the consumer to pay a down payment and an annual option payment.
The option payments are applied to reduce the purchase price of the home if the consumer exercises the option to buy. The down payment and any annual option payments made were nonrefundable if the consumer left the plan, the Attorney General’s Office stated.
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