Bradford, J.
Case Summary [Footnote omitted.]
In May of 2013, Appellees-Defendants Katrina Carter and Quentin Lintner (collectively, “the Lintners”) signed a contract with Appellants-Plaintiffs Rainbow Realty Group, Inc., and/or Cress Trust (collectively, “Rainbow”) styled as a rent-to-buy contract (“the Agreement”) for an uninhabitable house in Indianapolis (“the Property”). The Agreement provided that the Lintners were purchasing the house, were responsible for all repairs, could retain all profits if they sold the house for more than their contractual payoff, would be subject to eviction if they defaulted, and would have their payments applied to the purchase price if timely made for two years. The Agreement did not require that it would end with a reversion of the Property to Rainbow.
Almost from the beginning, the Lintners failed to make consistent payments pursuant to the Agreement, and, in June of 2015, Rainbow filed suit to terminate it, seeking immediate possession, damages, and attorney’s fees. The Lintners moved for partial summary judgment on the basis that the Agreement was actually a lease and that Rainbow had violated Indiana’s warranty of habitability that applies to residential leases pursuant to Indiana Code article 32-31, chapters 3 through 9 (“the Landlord-Tenant Act”). [Footnote omitted.] The trial court entered summary judgment in the Lintners’ favor on the question of whether Rainbow had violated provisions of the Landlord-Tenant Act. Following a trial on remaining issues, the trial court entered judgment in favor of the Lintners, awarding them $4000 for what it concluded were Rainbow’s fraudulently deceptive statements as well as $3000 in attorney’s fees. Rainbow contends that the trial court erred in concluding that the Agreement was actually a lease and that it committed fraud by misrepresenting its true character to them. The Lintners contend that the trial court’s judgment was correct but that its award of $3000 in attorney’s fees (when approximately $35,000 was requested) constituted an abuse of discretion.
We conclude that the Agreement is not a lease subject to the Landlord-Tenant Act. We do so pursuant to a long line of Indiana precedent requiring all leases to have a definite term and a reversion to the lessor, provisions the Agreement lacks. Our conclusion leads to the further conclusion that there is no basis on which to find that Rainbow committed fraud as a matter of law. Finally, because the Lintners did not prevail in the trial court, they are not entitled to recover any of their attorney’s fees. We reverse and remand with instructions to enter judgment in favor of Rainbow on their claim for eviction and immediate possession of the Property. We also vacate the trial court’s judgment that Rainbow committed fraud and its award of attorney’s fees to the Lintners.
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The central question of this case is whether the Agreement was a lease governed by the Landlord-Tenant Act, and to answer this question, we must examine the provisions of both the Landlord-Tenant Act and the Agreement…
Indiana Code section 32-31-2.9-3 defines the scope of the Landlord-Tenant Act, providing that it “appl[ies] to rental agreements for dwelling units located in Indiana.” When the Landlord-Tenant Act applies, it requires a landlord to warrant a rental property’s habitability, providing that, inter alia, “[a] landlord shall [… d]eliver the rental premises to a tenant in compliance with the rental agreement, and in a safe, clean, and habitable condition.” Ind. Code § 32-31-8- 5. There is no dispute that if the Landlord-Tenant Act applied to the Agreement, the Agreement violated the Act’s warranty of habitability for rental premises. The question is whether the Landlord-Tenant Act applied to the Agreement.
While the Landlord-Tenant Act does not define “lease,” it broadly defines a “rental agreement” as “an agreement together with any modifications, embodying the terms and conditions concerning the use and occupancy of a rental unit.”3 Ind. Code § 32-31-3-7(a). This limited guidance for determining whether a particular instrument is a lease is not quite sufficient to dispose of the question in this case. Fortunately, the Indiana Supreme Court has provided us with the additional guidance required.
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Turning to the Agreement, it did not require that it would end after a definite term, much less end with reversion of the Property to Rainbow, which are necessary features of all leases in Indiana. We are therefore bound to conclude that the Agreement was not a lease and that the Landlord-Tenant Act’s provisions did not govern it.
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Conclusion
The Agreement admittedly has some characteristics that are commonly associated with sales contracts and some commonly associated with leases. On the one hand, the Agreement requires buyers to pay for taxes, insurance, and necessary repairs; allows them to build equity (eventually); and provides that they may sell the property and keep the profit, which are all provisions commonly associated with sales contracts and ownership. On the other hand, the Agreement does not provide for the immediate accumulation of equity, places somewhat severe restrictions on the use and alteration of the property, and allows Rainbow to evict in the event of default rather than resort to foreclosure. Devices such as the Agreement seem to be a sort of hybrid, and an argument could be made that neither the current law pertaining to sales contracts nor the current law pertaining to leases is adequate to address the issues such devices raise. The Lintners and the amici also argue that rent-to-own contracts such as the Agreement are against public policy, alleging that they are used to prey on ignorant and unsophisticated “buyers” lured by the dream of home ownership who almost invariably end up with neither the home nor their investment in it. This may happen in some cases. Such concerns, however, are beyond the scope of this opinion and are the province of the General Assembly.
That said, the central legal issue in this case is whether the Agreement was a lease, and we have concluded that it was not. Consequently, we reverse the trial court’s entry of summary judgment in favor of the Lintners based on the conclusion that Rainbow violated the Landlord-Tenant Act’s warranty of habitability. Moreover, we reverse the trial court’s judgment that Rainbow committed actual fraud by misrepresenting the nature of the Agreement. Finally, we reverse the award of attorney’s fees to the Lintners. We reverse the judgment of the trial court and remand with instructions to enter summary judgment in favor of Rainbow on its action for eviction and immediate possession of the Property and for further proceedings, as necessary.
The judgment of the trial court is reversed and remanded with instructions.
Baker, J., and Crone, J., concur.