Companies slapped with fine over property scheme
Thursday 27 August 2009
Three South Island companies that were involved in a scheme which mislead people into believing they were buying their own homes have pleaded guilty to breaching the Fair Trading Act.
By The Landlord
Invercargill Property Management, Newfoundland and Southern Housing Group were fined $38,500, $13,500 and $10,300 respectively and also ordered to pay reparation to those affected by the scheme.
From February 2003 to January 2005, Invercargill Property Management, which was employed to promote properties owned by Newfoundland and Southern Housing Group, marketed a scheme which led people to believe that they would be buying their own homes.
The scheme was aimed at people who were renting homes and who would not ordinarily be able to get a mortgage through a standard lender such as a bank.
In exchange for occupying a property, customers entered into a 30-year instalment agreement with the registered owners of the properties and paid weekly instalments of principal, interest, rates, taxes and insurance.
The occupier also agreed to pay for any repairs that the property required. It was not made clear to the occupier that this agreement did not give them legal title over the property until all the money had been paid in full at the end of the 30-year period.
The registered owners of the properties remained recorded on the titles as the owners of the properties with their own mortgages registered against them.
"This case reinforces that creators of property schemes must promote them accurately and disclose all relevant information to potential participants," Commerce Commission director of fair trading Adrian Sparrow says.
"Consumers should get independent legal advice before they sign up for any property agreements and they need to be sure that the agreement they are entering into has been properly explained to them."
He says some people who entered into the scheme were dissuaded from obtaining independent legal advice.
The Commerce Commission is continuing to take action against another company that is part of the Invercargill scheme, CMA Property Investments Limited.
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