wrappers - click on this



From: Colin Mills

Well I must say I was surprised at the number of replies to my (12% brain dead) post earlier this week. Perhaps I touched a raw nerve? I'd suggest a number of people on this site are a little too precious for their own good.
Fact is I started the post by saying it was all based on a conversation with a stranger who may have been simply embellishing the truth. As such I'm certainly not going to waste my hard earned money engaging my solicitor on here say. Nevertheless I have spoken to him on a number of occasions. His views prompt me to list the following:
1/ Wrapping would be construed by any court or magistrate as a business. Its a million miles removed from dear old mum and dad buying a passive IP for their retirement.
2/ ALL businesses require certain permits, licences and/or accreditation with the appropriate statutory authorities. There are LAWS to ensure compliance.
3/ It would be simplistic and naive not to comply with the requirements of point 2 above. Mugs with no business background or experience whatsoever suddenly starting a business involving relatively large sums of money and dealing unchecked and unfettered with members of the public would be unacceptable to most government authorities. Courts would look unfavorably in any legal tussle at these supposed business people.
4/ Wrapping is the primary business of borrowing and lending money. In actual fact it has little to do with real estate investment. You can wrap any asset,a car, truck, boat, virtually anything of value.
5/ Because wrappers do not accept deposits in the traditional sense they use a loophole to escape from the rules of the banking act. Should any wrapper have the audacity or stupidity to borrow money directly from the public they would be stamped on very quickly.
6/ The W.A. government is about to initiate a test cast against wrapping. Given item 3 above, my solicitors opinion is that this will be successful. As soon as that happens the entire industry (if that's the right word for it) will collapse like a deck of cards.
The quicker the better.
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wrappers - click on this (long response)

Reply: 1
From: Nigel W

Hi Colin

Let me preface this by saying I don't wrap (cause I think there's easier ways to make $ in real estate and I don't think its the most profitable use of my time). But I'm open to the method.

There's always a danger when you generalize.

>>1/ Wrapping would be construed
>by any court or magistrate as
>a business.

Well, its a matter of degree, but it certainly could be so. But the question which follows is: so what? There may be some tax implications of this, but otherwise there's no special "business licence" per se that you need.

>2/ ALL businesses require
>certain permits, licences
>and/or accreditation with the
>appropriate statutory
>authorities. There are LAWS to
>ensure compliance.

Let's not overstate the point. If I own a house and decide to sell it to someone on an installment contract with a loooong settlement date or if I lease a property to someone on standard Res Tenancies Authority terms and in another 1 page document grant them an option to purchase the property in the future, with a premium and strike price set out and the standard Real Estate institute contract attached thereto
I can do this till the cows come home and there's no "LAWS" against it. Its just vendor finance.

There are laws about just about everything you can think of - we are an incredibly over-legislated society and our federal system results in lots of state by state variations. But there is no law against the above. You don't need a Real estate agent's licence to sell your own properties. Sure there are certainly some tax implications and any wrapper will have to conduct themselves in an honest manner to avoid state and federal fair trading and misleading/deceptive conduct legislation. But that's about it.

The Uniform Consumer Credit Code MAY have some application to wrapping (there's a technical argument about deferral of debt constituting the provision of credit etc). But so what if it does apply? Again, it just imposes some (unfortunately fairly onerous) up front disclosure obligations.

With regard to wrappers using "investors" etc let's remember that there are some important exceptions to the disclosure document (ie prospectus) requirements in the corporations act (used to be "...law" but no more).

>3/ It would be simplistic and
>naive not to comply with the
>requirements of point 2 above.

Of course we must all comply with the law. The first step though is to figure out what is ACTUALLY required.

>Mugs with no business
>background or experience
>whatsoever suddenly starting
>a business involving
>relatively large sums of money
>and dealing unchecked and
>unfettered with members of the
>public would be unacceptable
>to most government
>authorities. Courts would look
>unfavorably in any legal
>tussle at these supposed
>business people.

I think you're being a bit condescending here don't you? There are some awfully clever, motivated and ethical people out there "wrapping". What courts frown upon is people misleading others or taking unconscientious advantage of an inequality of bargaining power. If there's full up front disclosure and the opportunity for independent advice a court is less likely to find against a party.

>4/ Wrapping is the primary
>business of borrowing and
>lending money. In actual fact
>it has little to do with real
>estate investment. You can
>wrap any asset,a car, truck,
>boat, virtually anything of

Sure you can wrap anything. But again, the question is, so what?

>5/ Because wrappers do not
>accept deposits in the
>traditional sense they use a
>loophole to escape from the
>rules of the banking act.
>Should any wrapper have the
>audacity or stupidity to
>borrow money directly from the
>public they would be stamped
>on very quickly.

I don't really follow what you're saying here. If I sell a property through an agent, then the deposit is held by the agent, in trust for the parties to be disbursed in accordance with the contract. If there's no agent involved and I'm selling my own property, the deposit is paid to me (or perhaps one of the parties' solicitors on trust) to be disbursed in accordance with the contract. That does not give rise to the requirement to hold any form of banking licence. The deposit is part of the purchase price - nothing more, nothing less.

>6/ The W.A. government is
>about to initiate a test cast
>against wrapping.

When agencies run test cases which are "adversarial" (ie its not a cooperative one where no-one's quite sure what the particular law means!) they always pick the one they think they can win. I am not aware of this case but:

a) let's wait for the result first. Many cases are brought about a lot of things - not all of them succeed!
b) I would not be surprised if the impugned conduct is more along the lines of misleading/dishonest conduct rather than some failure to obtain some sort of WA based credit provider's licence.

>Given item 3
>above, my solicitors opinion
>is that this will be
>successful. As soon as that
>happens the entire industry
>(if that's the right word for
>it) will collapse like a deck
>of cards.
>The quicker the better.

With the greatest respect to your solicitor (that's what you say when you insult a lawyer or judge) his or her answer is either a lazy one, an off the cuff one or in his or her defence one that wasn't paid for!

Colin, some of the responses to you HAVE been a bit precious. But let's not make sweeping generalizations that make out that all wrappers are shonky's engaging in illegal practices - its just not true.

They have found a market - the sub-prime lending market and are finding a way of facilitating people who can't get traditional finance to buy their own home.

Let's not condemn before we get all the facts straight.

Thanks for your original post - at least it stirred some debate!

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wrappers - click on this (long response)

Reply: 1.1
From: Rick Otton

hi colin, i agree lets bring in as much legislation as possible as we really want the last of australia's entrephreners to leave the country with their money just to prove to the world that as australia falls back into the dark ages ,there's no way progress will get ahead of us .
(now as advance australia fair plays we all stand up,hands on our hearts,chins out and sink into the mud as the rest of world thinks to itself " there goes a country that was")Rick otton-the little aussie wrapper!
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Reply: 2
From: Anonymous


I dont do wraps.

Can you please elaborate on the "taxcheat" component of your email address ? Ethics, legals morals, maybe Im jumping to conclusions ?
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Reply: 2.1
From: Sergey Golovin

Colin if it is true what are you saying that -

4/ Wrapping is the primary business of borrowing and lending money

Borrowing and lending money...It will never end. People had been doing it for centuries. In Egypt 5000 (?), Turkey 2000 (?) or maybe more years ago, etc.

What do they say - the more the changes the less it change... Or something?


· I personally do not do wrap, but it does not change or mean anything.
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Reply: 2.1.1
From: Scott Marshall

12% is good, GE (nee AVCO) charge up to 45%, the poorer you are, the more they like you. Some people are owned by them. "you can borrow $1000 for this christmas NOW"
Try this.. ring them and ask their interest rate .. be surprised, be very surprised......

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