Several U.S. Senators have launched a probe into a now-defunct real estate company that promised to offer homeowners the chance to “unlock” the equity of their homes through a unique sale-lease arrangement. An NPR investigation found this cost some residents thousands of dollars, and others their homes.
This is the most recent development in the challenges that EasyKnock faces. The company announced its closure earlier in the month.
In a letter to Easyknock on December 16, senators expressed concern over how these deals have affected homeowners who turned to the company during financial stress. They inquired about what the closure would mean for people renting homes they sold to the company.
“We are deeply concerned about EasyKnock’s lasting impact on vulnerable homeowners, including homeowners with pending residential sale-leaseback agreements with your company, and the extent to which the company will be handling these agreements in the wake of its abrupt closure earlier this month,” reads the letter.
It was signed by lawmakers, Democrats, and Independents, including Sen. Elizabeth Warren, D-Mass., Sen. Richard Blumenthal, D-Conn., and Sen. Bernie Sanders, I-Vt.
EasyKnock did not immediately reply for comment, but past company officials have said its deals have helped people stabilize their financial issues.
A Probe from the Senate
The Senate probe seeks information on how many homeowners repurchased their homes after entering a sale-leaseback deal with EasyKnock and how many were evicted from them. Senators are also requesting clarification on why EasyKnock decided to close its doors so abruptly on December 5 and what that means for the homeowners who are suing the company.
Lawmakers are also requesting information on what will happen to the company’s current tenants. EasyKnock had alerted homeowners that their properties would be managed by NESE Property Management but offered no further explanation. According to records, senators have also requested the company clarify its relationship with NESE Property Management, which shares a P.O. box with EasyKnock.
In an email to NPR, Elizabeth Warren said she’s launching the probe as a way to “ring the alarm so people can be on alert.”
Not the First Time This Has Happened
This is not the first time regulators have been concerned about EasyKnock’s sale-leaseback options. Last year, the Massachusetts attorney general signed a settlement in which EasyKnock agreed to cease operations in the state. Meanwhile, the attorney general of Michigan is investigating the company.
The Connecticut attorney general also sued EasyKnock in November, alleging the company targeted homeowners looking for mortgage loans by confusing their marketing and changing the terms of the deal to their detriment while violating state landlord-tenant laws. The attorney general described EasyKnock’s business practices as “oppressive, unethical, immoral, and unscrupulous.”
EasyKnock faces more than two dozen lawsuits from homeowners around the country. The company has denied liability and says it is cooperating with attorney generals.
Prentiss Cox, a University of Minnesota Law professor who previously ran the consumer protection division at the Minnesota Attorney General’s Office, stated that the actions by state attorney generals are signs that consumer protections are working.
“Enforcement can highlight problems, and if you can eliminate the underlying financing or other support for it, it can solve problems,” he said.
“But this is only part of the puzzle,” Cox added.
Regulatory Grey Areas
Sale-leaseback deals operate in regulatory grey areas. EasyKnock argues that its deals are not bound by state and federal consumer protection laws because its transactions are sales, not loans. EasyKnock is not the only company doing these types of deals, Cox says, and regulations will be necessary to tackle them more broadly.
Cox stated: “This looks like a problem that’s probably going to proliferate with small entities. So when that’s the case, I think your only option is to pass laws that make it a technical violation to do what they’re doing or bring these transactions within other structures that can be efficiently enforced.”
