Deposit Power collapse to affect 10,000 home buyers

Deposit Power collapse to affect 10,000 home buyers
Deposit Power collapse to affect 10,000 home buyers

Deposit guarantee company Deposit Power is now under external administration following the placement of Auckland-based CBL Insurance into interim liquidation.

External administrators from Chifley Advisory were appointed to the company.

Deposit Power offered deposit guarantee bond products, assisting Australian borrowers and investors to buy residential and commercial properties without the need to provide a cash deposit.

In a report by the Australian Financial Review, an estimated 10,000 residential, commercial, and property investors could be affected by the company’s collapse.

The deposit bonds are a form of bridging finance for up to 48 months for off the plan buyers.

Investors calling the Sydney office are met with a recorded message that the company is facing "external issues."

Deposit Power's bonds were sold to first time buyers.

Self managed super funds purchasing commercial or residential property are also using the deposits bonds. 

After the interim liquidation, insureds and beneficiaries under policies and surety and financial risk bonds are being urged to obtain advice from their insurance brokers to determine whether they need to purchase new insurance cover or secure additional or replacement bonds. 

A notice from the external administrators says CBL Insurance is “liable to pay any valid claims payable to any beneficiary of any guarantee issue by them”, and that all claims should be directed to CBL Insurance.

New Zealand’s High Court ordered CBL Insurance last month to be placed into interim liquidation following the Reserve Bank of New Zealand’s application.

Auckland-based insurance broker and building warranty provider Stamford Insurance said in a statement yesterday that it has stepped in to protect CBL Insurance clients. Stamford said it has secured Lloyd's of London’s help to protect buyers and homeowners.

It is not clear from the company's statement if its scheme to protect CBL Insurance clients will cover those in Australia as well.

“The underwriters in London responded immediately to our request and are committed to providing New Zealand homebuyers with the finest building warranties," said Stamford director Duncan Colebrook in the statement.

Stamford said its scheme will do the following:

  1. For buyers who have signed a contract and paid a deposit where work has yet to start, Stamford will cover the risk that they may lose their deposit if their builder becomes insolvent.
  2. If construction has already started, Stamford will guard against builder insolvency and provide 10 years’ defects cover on completion.
  3. For homeowners who have taken possession of their homes within the past 12 months and who may have lost their protection against major defects arising with their home, Stamford will offer them a new 10 year policy.

Deposit Power’s external administrators said in the notice that an interested party may buy the company’s business, but that “the sale has its complications as the company was only an agent/authorised manager of CBL Insurance”.

“Given the nature of the company’s operation, any sale transaction will need to happen quickly, or it will not happen at all.”

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