Rent to own - rights for compensation?

[aterese]

I am seeking anyone's help in understanding any avenues to seek compensation for a Rent to Own contract failure.

In summary, we were the buyers who followed everything to the T, the owner went into bankruptcy and we got kicked out losing all our money after 12 months paying option fees, rent, all house ongoing costs/repairs, further investments in the house (tinting/landscaping) and a deposit.

The main reason this happened was due to the vendor finance agent who broke a laws about disclosure, was not paying the owner the mortgage payments on time or house rates (or the full amounts), did not insure the home (we paid extra for that) and a large number of practices that lead to the bank closing in on two properties. This vendor representative had all the money paying in to him (we paid a real estate agent who just transferred the lot to him every week unbeknown to us) and two separate contracts (one for us, one with owner).

The contracts had a lot of gaps (found after the fact) and the biggest problem was that the house was marketed (with false valuation) at $950,000 - but had a mortgage towards $800,000 (falsely declared as $550,000) and the property value itself by the bank was under $700,000 which to this day they cannot sell. The vendor finance agent was extremely dishonest about all the information on the property, the owner's finances (loan ratio was about 96% over all her properties, with many empty) and their was NEVER a chance that after 4 years we would have been able to finance the remaining property purchase with a bank - as the price was extremely inflated over it's true valuation (not even taken into account the last 2 years diving prices).

So we have been out of the property 12 months and couldn't cope after it all with chasing the vendor agent as he just took off to WA and couldn't be served papers.

I have since found he is still trading for the past year selling Rent to Own properties in QLD including advertising the same owner's house next door (and the same $200k + inflation price). This property also fell under with a Rent to Own for another buyer at the same time.

I spoke with ASIC who are interested in class actions only and not one individual case, for which they would only consider disciplinary action but offer no compensation to us. I spoke to OFT who told me that they don't cover vendor finance and only real estate property agents. I researched QCAT and I am confused if we qualify there as it really doesn't fit in their areas of application. I event followed the Vendor Finance Credit association (or other such name) and they again would review the case but only look to cancel his licence and cannot order compensation.

This situation put us $35k loss, for which we are still paying a personal loan (deposit)....plus huge moving costs and has ruined our financial future for the next few years. We are seeking just the $10k deposit to be returned so we can pay out the loans. We have accepted the loss of the option fees, investments in the property and other outgoings (which all went in his pocket).

We don't believe it possible or worthwhile to claim against the owner (broke and didn't see majority of the money), the real estate agent managing the property (followed all responsibilities given the orders from owner/vendor agent and complied with RTA legislation)....so this vendor agent is our only real path for compensation.

Given we are broke and have so much conflicting information from lawyers we contacted, we cannot just continue to go see lawyers for advice who waste our money.

We need someone who understands this particular type of home buying to state factually where we should go next to seek a court hearing in QLD if it is possible at all.

We are happy to do the leg work ourselves once we understand the right path. Of course we have all the documentation including a diary, ready for building our case.

Can anyone give suggestions ?

 

[Rolf Latham]

does the bankrupt person have any assets that may be worth chasing outside of the obvious ?

Its highly likley that if the person is bankrupt and under trustee, you will be chasing something with little outcome

ta

rolf

 

[thatbum]

I have to say, it sounds like the matter is probably too complex to be worth chasing up for that amount of money.

If even the lawyers you see are not sure what to do, then its not a good sign.

 

[DaveM]

Can a buyer on a rent to own lodge a caveat on the property as they have an equitable interest in it? Might be able to force the owner to deal with you in order to be able to sell the asset.

 

[aterese]

Thank you for the replies.

The owner has debt higher than the value of all properties, this being the reason the bank closed down. They just kept borrowing to fund further purchases and debts, which with the marketplace drops spiralled out of control.

We do not see the owner as responsible as the reason for the failed contract was directly due to behaviour of the vendor finance agent.

We believe this vendor finance agent has assets (home, continued income from the same with other property contracts, job)...and considering he has lump sum deposits in his bank, surely he can repay that deposit back to us even if by instalments under court order.

Lawyers didn't have a clue about this type of contracts and just wanted extensive money to pursue, so we didn't continue with them.

$10k deposit might sound nothing, but to us continuing in our own financial pain ever since, it would mean the world to getting back on our feet!

 

[skater]

Have you spoken with your lawyer? The one that gave you advice before you purchased. At least that lawyer would have a working knowledge of what has transpired.

 

[aterese]

That was a whole other story, used recommended lawyers of vendor finance agent (doh) to draw up paperwork and turned out it was fraudlent (never paid lawyer for work). Another $750 down the drain up front which only discovered paperwork not legite after bank closed in

 

[RPI]

Although often not worth the expense in these cases, in your particular case it might be possible to go after the vendor finance agent or their insurance company, in which case the legal fees can be covered.

When you say Vendor Finance Agent, what sort of agent where they? Did they run through a company or in their own name etc?

Send me an email with all the details and I will have a look at it for you and work out whether I think it is worth pursuing for you.

Darryl

 

[The Y-man]

I spoke with ASIC who are interested in class actions only and not one individual case, for which they would only consider disciplinary action but offer no compensation to us. I spoke to OFT who told me that they don't cover vendor finance and only real estate property agents. I researched QCAT and I am confused if we qualify there as it really doesn't fit in their areas of application. I event followed the Vendor Finance Credit association (or other such name) and they again would review the case but only look to cancel his licence and cannot order compensation.

Not sure if the FOS can help - might be worth asking them anyway.

http://www.fos.org.au/centric/home_page/resolving_disputes/how_to_lodge_a_dispute.jsp

The Y-man

 

[aterese]

Thank you Darryl, I will send an email tonight.

The agent is registered with ASIC as credit adviser and does have laws they have to abide by (which we've recorded down the breaches). What you summarised is exactly where I was coming from

I believe I tried FOS but will check again (they could only encourage removal of his licence and kept sending me back to ASIC).

There is actually a claim fund under ASIC to cover these situations, but ASIC told us they only use it for large class action claims and not individual situations. So they refused to do anything.

 

[Ausprop]

this is a really tricky situation. I know even bankruptcy trustees are a little rattled as to what to do with these such properties. EOD if the house was so over valued you wouldn't want to complete anyway - a lesson for you there to make sure you don't overpay in future. As to the actions of the agent, the sums aren't large enough to launch any serious sort of legal action (and you state you have no funds anyway - you would want $150k set aside to start this sort of thing) and it seems the govt agencies are all useless. I would explore what you can with any other govt agencies, otherwise time to move on with your life. You have probably just overpaid rent for 12 months.

 

[RPI]

If they have insurance it can still be worth it depending on whether the transgressions were substantial enough to warrant a court to award a decent level of legal fees.

On the other hand if they have some level of assets and no insurance, you can sometimes obtain a default judgement because they can't be bothered trying to defend. It that case legal fees can be reasonable and you get some recovery.

It is often best to move on with your life and forget it. But its all realtive

 

[Peter 14.7]

I suggest contacting ACA or Today Tonight.

Very likely you will get nothing other than the satisfaction of them putting a camera in his or her face and shaming them on national TV.

In the end, you entered in to a contract with a private person. Not a bank or financial institution that has at least legal obligations and authority like APRA to watch of them.

Even when they do have obligations like Banksia VIC Collapse, if there is no money, no one gets any thing. In this case is it expected crditors will get 50 c in the $1.

A shank like this will have set it up so andy cash is long hidden with partner or OS, like Alan Bond who went under and paid his creditors to get out 1/2 of 1 c in the $ return.

Sorry, Peter 14.7

 

[Peterw]

I was expecting to see posts from the members of this forum, who actively promote vendor finance, to be offering assistance/advice. A view of the innovative techniques forum may help.
Sorry, just reread your posts, and I believe this is in QLD. You say you have approached the Office of Fair Trade. They cover all "trading" in QLD. They are great at knocking back quiries, because they dont want work. Yes, they are the body that monitors the Act that covers agents, but that not all they do. Go onto their website, read and learn. and then quote it back to them. Also, go to your local state MP, take your kids your friends kids, I think you know what I mean, and inform him/her that the department set up to protect/assist consumers is not working. Now, I think you said you paid you money to a real estate agent, then that must bring the OFT into the equation. Are you still in the house, have you started a dialogue with the bank? PM me as I am happy to meet to see if I can assist.
Sorry, just reread, you are out of the house. I still have ideas. PM me.

 

[cu@thetop]

Can a buyer on a rent to own lodge a caveat on the property as they have an equitable interest in it? Might be able to force the owner to deal with you in order to be able to sell the asset.

This may still be a goer. Place the caveat and make it non lapsing by commencing proceedings.

I must say I am a bit confused by the whole arrangement and it would help if you described the documentation entered into.

The problem with vendor finance/ rent to buy schemes is that there a multitude of arrangements people can enter into:

Instalment contract
lease with option
Trust arrangement

to name a few.

The lawyer who acted for you will be insured. His/her excess will be 15k or 45k if they didn't follow the conveyance protocol (although this may not be a conveyance as such). Irrelevant if bill paid or not.

Not worth litigating for 35k IMHO.

 

[NedKelly]

I am just wondering about what would have happened if the guy hadn't gone bankrupt. I don't know the content of the option agreement but you presumably had an option to buy this property at a fixed amount which you now say was $250,000 over the top less rent paid. Had you actually gone ahead with the purchase you would have been worse off than walking away which is to all intents and purposes what has happened.

 

[NedKelly]

Also, if you paid a $10,000 deposit then I would have thought that should be held in a lawyers trust account somewhere. You say you are out of pocket by $35,000 but if you discount the rent you would have paid to live in a property valued between $700k - $950K then I don't think you are out of pocket by an amount worth going to court over.

 

[cu@thetop]

Also, if you paid a $10,000 deposit then I would have thought that should be held in a lawyers trust account somewhere. You say you are out of pocket by $35,000 but if you discount the rent you would have paid to live in a property valued between $700k - $950K then I don't think you are out of pocket by an amount worth going to court over.

I bet there isn't one rent to buy operator in Australia that would leave funds in trust. Trust funds are to protect the buyers. Wrappers see it as "an innovative technique to increase cashflow" to release the deposit to themselves immediately.

 

[Lofty]

Hi Peterw

Thanks for the heads up regarding this thread. I don't usually visit the Commercial sub-forum.

Aterese, while it's too late now, your legal position in regard to buying a property with vendor finance would have been much stronger if you had been using a properly structured Instalment Contract. These Contracts have numerous precedents in warding off trustees in bankruptcy.

However you used a Residential Lease and a Call Option, i.e. a Lease/Option (usually called a Rent To Own). Neither a Residential Lease or a Call Option is a credit contract and therefore neither ASIC or FOS have jurisdiction. Also, a Lease/Option does not require the coverage of an Australian Credit Licence, even though, as you mentioned, this vendor financier sounds like s/he has one.

The OFT does have jurisdiction over Residential Leases and I believe you may be able to lodge a valid complaint with the OFT if this vendor financier didn't have a real estate agent licence at the time, i.e. a complaint of acting as a real estate agent without a licence. I say this because I'd imagine you can show that this vendor financier organised a residential lease on a property s/he did not own. To organise a residential lease on a property you don't own, is to act as a real estate agent.

It is relatively easy to lodge a complaint with the OFT and, if you get the result you want from this complaint, it may open the way for a claim in the QCAT

The only 'big stick' open to the Vendor Finance Association of Australia (VFA) is cancellation of membership. If you would like to PM me the details of this matter, as a Committee member, I'd be happy to put it before the full Committee of the Association.

Cheers, Paul

 

[The Y-man]

Thanks for the heads up regarding this thread. I don't usually visit the Commercial sub-forum.

Ooo... didn't realise where this thread was sitting - moving it now.... thanks.

The Y-man