A fourth company involved in an Invercargill scheme which misled people into believing that they were buying their own homes has been convicted of eight charges of breaching the Fair Trading Act in a hearing in the Invercargill District Court today.
CMA Property Investments Limited (CMA) has been fined $40,000 and has been ordered to pay $42,290 in reparation to occupiers of properties involved in the scheme. CMA was also ordered to pay $1,040 in court costs and $1,600 in solicitor’s costs.
CMA, along with Southern Housing Group Ltd and Newfoundland Limited, was an investor company in a scheme which purchased residential properties and then found people to occupy those properties by signing them up to long-term instalment agreements. Invercargill Property Management Ltd was established to promote and manage the scheme. In August 2009, Southern Group Housing, Newfoundland Limited and Invercargill Property Management all pleaded guilty to breaching the Fair Trading Act in relation to the scheme. The three companies were fined and ordered to pay reparation.
From February 2003 to January 2005 CMA was involved in a scheme which led people to believe that they would be buying their own homes. The scheme was aimed at people in Invercargill 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 would 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, the property investment companies, remained recorded on the titles as the owners of the properties with their own mortgages registered against them.
“The occupiers did not believe that they were getting involved in a ‘rent to buy’ scheme. They thought that the agreements that they entered into gave them all the normal rights associated with buying a house. This was not the case, as the legal title to the houses remained with the property management companies. The occupiers would not have owned their own homes until the end of the 30-year period,” said Adrian Sparrow, Commerce Commission Director of Fair Trading.
“When entering into any major agreement such as the purchase of property consumers should always seek independent legal advice and ensure that the terms and conditions of any agreement have been clearly explained,” said Mr Sparrow. “It is also important that those involved in property investment schemes ensure that all marketing and promotion of the schemes is accurate and all relevant information is disclosed to potential participants.”
CMA Property Investments Limited is a registered company, incorporated in March 2008. The director and principal shareholder is Christopher Mark Ashenden.
In August 2009, three companies involved in the property management scheme pleaded guilty to breaching the Fair Trading Act:
Invercargill Property Management Limited was fined a total of $38,500 and ordered to pay $25,000 in reparation to occupiers of properties that the company had managed;
Newfoundland Limited was fined $13,500 and ordered to pay reparation of $10,955; and
Southern Housing Group Limited was fined $10,500 and ordered to pay reparation of $5,000.
The Fair Trading Act. Court penalties for breaching the Fair Trading Act can include fines of up to $200,000 for a company and $60,000 for an individual. Only the courts can decide if the Fair Trading Act has been contravened and set appropriate penalties.
Section 14 1 (b) False representations and other misleading conduct in relation to land says:
No person shall, in trade, in connection with the sale or grant or possible sale or grant of an interest in land or with the promotion by any means of the sale or grant of an interest in land,—
(b) make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put, or the existence or availability of facilities associated with the land.
Commission media releases can be viewed at www.comcom.govt.nz