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The New York-based sale-leaseback company EasyKnock scored a legal win in its battle with a Texas couple who claimed that their transaction was actually a loan in disguise.
The ruling was an important early sign for the company, which has faced consumer lawsuits in Maryland, South Carolina, Pennsylvania and Ohio, and enforcement actions in Michigan and Massachusetts that posed risks to its business model.
EasyKnock scored a victory in Texas last month when an arbitrator who considered the case ruled in its favor and awarded the company $153,000.
“We are thrilled with the arbitrator’s ruling, which affirms the integrity of EasyKnock’s business model and clearly identifies our sale-leaseback as a true sale,” EasyKnock CEO Jarred Kessler said in a statement. “This victory is a bold statement that EasyKnock operates in full compliance with the law and provides a valuable, lawful option for homeowners to access their equity.”
At issue was a Texas couple who sold their home to EasyKnock and then agreed to lease it back from the company with the option to buy it back or direct the company to sell it.
The couple later challenged the transaction and claimed it was a disguised loan that violated Texas lending laws, claims that EasyKnock denied.
The lawsuit followed an investigation by NPR, which included an analysis of over 400 properties that EasyKnock purchased in Texas. The investigation found the deals “cost some people tens of thousands of dollars in equity and that the vast majority of people do not buy their houses back.”
EasyKnock told NPR the civil lawsuits are “meritless” and that it’s cooperating with attorneys general looking into its business practices. If homeowners lose money on sale-leasebacks, it’s because of personal circumstances or the local housing market, the company said.
In a May 20 cease-and-desist letter, Michigan’s attorney general ordered the company to halt what it claimed were unlawful business practices, including misleading marketing and “oral misrepresentations made by EasyKnock representatives” to induce consumers to enter into sale-leasebacks.
“EasyKnock’s sale-leaseback solution continues to provide a non-lending alternative for homeowners facing financial difficulties,” Kessler said. “This ruling reaffirms that our model is not only innovative but also entirely legal. We are committed to helping more homeowners secure financial stability through our transparent, fair sale-leaseback agreements.”
