Living on the Fringe Rent-to-buy and vendor finance Susan Quinn, Senior Policy Officer 28 March 2017

Have you seen this?

Learning outcomes Know the risks of ‘rent-to-buy’ schemes Identify if a client is in a rent-to-buy scheme Know what happens after you refer a client to a lawyer Provide effective assistance to a client Know how to make complaints and advocate

What is rent-to-buy? ‘Buy without a bank’ Targets hopeful homeowners and desperate homeowners Metro and regional areas Varied contracts and deals Vendor finance/vendor terms Rent-to-buy/lease-options *Unusual* off-the-plan deals http://consumeraction.org.au/fringe-dwellings-vendor-finance- rent-buy-housing-black-market-report/

What is ‘rent-to-buy’? (cont’d) Big risks and uncertainties A small industry on the fringes On the regulators’ radars

Typical transaction Broker signs ‘joint venture’ with homeowner Broker signs up a buyer Buyer pays deposit, moves in & makes payments…

Client experiences Client video

What are the risks?

What are the risks? (cont’d) Home buyers No legal ownership Uncertain legal rights Money at risk Home at risk Unaffordable Unknown costs Default fees and charges Can’t get finance Home owners Loses legal control No fast sale Less profitable than expected Responsible for the broker’s conduct  

Is your client in a rent-to-buy scheme? I’m renting for three years then I can buy it I couldn’t get a mortgage but my friend told me… I’m buying directly from the owner I saw it on Gumtree

Activity 1: Issue spotting Your client shows you this document (groups 1, 2 and 3) What can you glean from the document? What would you ask your client? What are your concerns for your client? What else do you need (documents, info, assistance)?

What will a lawyer do? Assess legal position and prospects Property title search Property market value Financial records Due diligence (companies and individuals) Seek specialist advice/assistance Provide legal assistance Advise the client Negotiate for the client Litigate? Make complaints

The bigger picture: Complaints

The bigger picture: Advocacy

The bigger picture: Change in Victoria? Consumer Affairs Victoria’s current Consumer Property Law Review COMING SOON: Options paper No more rent-to-buy? Client stories count See https://www.consumer.vic.gov.au/resources-and- education/legislation/public-consultations-and- reviews/consumer-property-law-review

Checklist Manage housing security Get details Documentation Proof of payments Correspondence Pre-sale representations Manage client expectations Refer client to a lawyer Consider alerting regulators

Activity 2: Assisting a client Case study 1 or 2 How would you effectively assist your client?

Recap of learning outcomes Lots of big risks Listen/look for key things Use the assistance checklist Lawyer up Complain

Call us! Consumer Action Law Centre Level 6, 179 Queen Street Melbourne VIC 3000 Worker Advice Line: (03) 9602 3326 Rural access: 1300 881 020 Mon – Fri 10am to 1pm and 2pm to 5pm Email: advice@consumeraction.org.au