For Chuck and Kate Kane, a financial arrangement that promised a way to unlock the value of their Colorado home without the burden of monthly payments has evolved into a legal battle over a potential six-figure payout. The couple has filed a federal lawsuit seeking class-action status against Unison, a home investment firm, alleging that the company’s “equity sharing agreement” violated consumer protection and lending laws.
At the heart of the home equity agreement lawsuit is a fundamental disagreement over what the product actually is. Whereas Unison markets the arrangement as an investment partnership, the Kanes argue it functions as a loan—one that bypassed critical disclosure requirements that would have alerted them to the true cost of the capital.
The financial stakes are significant. According to the complaint, the Kanes received approximately Unison’s upfront payment of $87,000 in 2018. However, nearly eight years later, the couple says they could owe more than $278,000 if they sell their home today, driven by the surge in local property values.
The mechanics of equity sharing
Unlike a traditional home equity line of credit (HELOC) or a cash-out refinance, a home equity agreement (HEA) does not require the homeowner to develop monthly interest payments. Instead, the company provides a lump sum of cash in exchange for a percentage of the home’s future appreciation.
In the Kanes’ case, the agreement granted the company an option to claim a 70% share of the home’s equity increase over the duration of the contract. The couple used the initial $87,000 for home improvements, but the lawsuit alleges they did not fully grasp the long-term implications of giving up such a large portion of their home’s growth.
The attorney representing the Kanes noted that the product is often marketed with language that suggests a low-risk partnership. “They offer a product using certain language, consumers enter into that product, and then they discover they didn’t secure what they thought they got at the outset,” the attorney said.
To illustrate the difference between these products, it is helpful to look at how they distribute risk and cost:
| Feature | Traditional Loan/HELOC | Home Equity Agreement (HEA) |
|---|---|---|
| Monthly Payments | Required (Principal &. Interest) | Typically none |
| Cost of Capital | Fixed or Variable Interest Rate (APR) | Percentage of future home value |
| Repayment Trigger | Scheduled payments or maturity date | Sale of home or complete of term |
| Risk Distribution | Borrower bears all interest risk | Company shares in value fluctuations |
The legal divide: Investment or hidden loan?
The central legal question in the Kanes’ suit is whether an HEA is a legitimate investment or a “disguised” loan. If the court determines the agreement is a loan, Unison would have been required to provide specific disclosures, most notably the Annual Percentage Rate (APR). This figure would have allowed the homeowners to compare the cost of the $87,000 against traditional borrowing options.
The complaint further alleges that the “partnership” framing is deceptive because the financial responsibilities remain entirely one-sided. While Unison shares in the profit, the homeowners remain solely responsible for property taxes, insurance, and the ongoing maintenance of the asset.
Unison has defended its model in previous disputes, arguing that the product is an option contract rather than a loan. The company maintains that because the final payout is tied to the home’s future market value—which could theoretically decrease—the arrangement does not fit the legal definition of a loan.
Growing regulatory and judicial scrutiny
The Kanes’ lawsuit is part of a broader national trend of increasing scrutiny toward home equity investment firms. Consumer advocates, including the National Consumer Law Center, have warned that these products can be prohibitively expensive for homeowners who do not have a sophisticated understanding of equity options.
Judicial views on these contracts are beginning to shift. In a notable precedent, the U.S. Court of Appeals for the Ninth Circuit ruled that certain home equity agreements could potentially be classified as reverse mortgages under state law, which would subject them to much stricter regulatory oversight.
Federal regulators have also stepped in. The Consumer Financial Protection Bureau (CFPB) has issued warnings that these contracts can be complex and costly, making it difficult for consumers to accurately calculate the total cost of the funds they receive.
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Individuals considering home equity products should consult with a licensed financial advisor or legal professional.
The next phase of the litigation will center on whether the court grants the Kanes’ request for class-action status, which would allow other homeowners in similar agreements to join the suit. Further filings are expected as the court determines if the product’s marketing constitutes a violation of consumer protection laws.
Do you have experience with home equity sharing agreements? Share your thoughts or questions in the comments below.
