Can rental property with two living units be exempt from Regulation Z?

The correct answer states that a rental property with two living units can be exempt from Regulation Z if the property is not for business purposes. Regulation Z, which implements the Truth in Lending Act, primarily aims to protect consumers in credit transactions by requiring clear disclosure of terms and costs associated with borrowing.

In cases where a property has two living units, an exemption applies if the owner is not using the property primarily for business. For instance, if one unit is occupied by the owner as their primary residence and the other unit is rented out, the property may still be viewed as a residential dwelling rather than a purely investment property. This distinction is important because Regulation Z is focused on protecting consumers engaged in consumer credit, as opposed to those involved in business transactions.

This principle acknowledges that the consumer protections of Regulation Z are less relevant for properties that are strictly for investment purposes. Thus, the focus is not on the rental income generated but rather on whether the property serves as a home for the owner.

In contrast, if the property were used solely for business or investment related to rental activities, it would typically fall under the purview of Regulation Z. This shows the importance of the intended use of the property in determining its treatment under the regulation.