131 N.E.3d 168
Ind.2019Background
- Rainbow Realty (manager) and Cress Trust (owner) offered a "rent-to-buy" agreement for a dilapidated single‑family house to Katrina Carter and Quentin Lintner; the couple paid deposit and monthly payments but the house was uninhabitable (missing toilets, exposed wiring, broken windows, no secure doors, animal infestation).
- The written agreement labeled the transaction a purchase, required $549/month for 30 years, but expressly treated the first 24 payments as "rental payments" and conditioned any sale on execution of a later land‑sale contract; plaintiffs reserved landlord rights including eviction for nonpayment.
- Plaintiffs repeatedly sought eviction when payments fell into arrears; the couple defended and counterclaimed alleging breach of the statutory warranty of habitability, deceptive sales practices, and other claims.
- The trial court held the agreement unenforceable to the extent it attempted to waive habitability protections, awarded the couple damages and attorney fees (reduced from requested amount); the court of appeals reversed on the ground the agreement was a sale not a lease.
- The Indiana Supreme Court granted transfer to decide whether the rent‑to‑buy agreement was a sale (exempt) or a rental agreement (covered), and to resolve related claims for deceptive practices and attorney fees.
Issues
| Issue | Plaintiff's Argument (Rainbow/Cress) | Defendant's Argument (Carter/Lintner) | Held |
|---|---|---|---|
| 1) Is the rent‑to‑buy agreement a "contract of sale" exempt from the residential landlord‑tenant statutes? | The agreement is a purchase contract (labels, price, interest, amortization, buyer declarations) so occupants are purchasers and statutes don’t apply. | The agreement functioned as a lease for the first 24 months with a contingent option to convert; parties retained landlord/tenant relationships during that term. | Not a contract of sale for the initial term; treated as a lease with contingent sale. Statutes not excluded. |
| 2) Is the property a "dwelling unit" and the agreement a "rental agreement" subject to statutory habitability obligations? | Even if a residence, parties waived habitability; not a tenant/landlord relationship for statutory protections. | The house is a dwelling unit promised for residential use and the couple occupied it with consent and for consideration, so Chapter 8 applies and waiver is void. | House is a "dwelling unit" and the agreement is a "rental agreement"; statutory warranty of habitability applies and the waiver is void; plaintiffs breached it. |
| 3) Did plaintiffs violate the Deceptive Consumer Sales Act by disclaiming the warranty and making deceptive statements? | Their statements were legal positions about the contract’s nature and not knowingly false; in any event the Act excludes most real property transactions. | Plaintiffs intentionally deceived the couple about their ability to disclaim habitability and other rights. | Reversed the trial court: plaintiffs’ legal (but ultimately incorrect) position was not shown to be knowingly deceptive, the couple did not show reliance, and the Act excludes consumer transactions in real property—judgment for plaintiffs on this claim. |
| 4) Were the trial court’s attorney fee findings and award reasonable? | Plaintiffs argued the large fee request was excessive. | The couple sought full fees (~$35,475) as prevailing parties under the statutes. | Trial court erred by failing to adequately support its near‑92% reduction; fee award vacated and remanded for detailed reasonableness findings (trial and potential appellate fees). |
Key Cases Cited
- Skendzel v. Marshall, 301 N.E.2d 641 (Ind. 1973) (distinguishing incidents of ownership and eviction rights when a sale has vested equitable title)
- Town of Brownsburg v. Fight Against Brownsburg Annexation, 124 N.E.3d 597 (Ind. 2019) (use of ordinary dictionary meaning to define undefined statutory terms)
- Masters v. Masters, 43 N.E.3d 570 (Ind. 2015) (trial court discretion and considerations in awarding attorney fees)
- Rainbow Realty Group, Inc. v. Carter, 112 N.E.3d 716 (Ind. Ct. App. 2018) (appellate court opinion reversing trial court on applicability of landlord‑tenant statutes)