"We Buy Houses" claims from rent to buy promoters prompts fine
Patricia Mirawati Susilo and brother Bryan Artawaijaya Susilo, of Karawara, have been ordered to pay $17,500 and $12,000 respectively after admitting to misleading and deceptive conduct around a rent to buy scheme. They were also required to pay $8,000 in costs.
Patricia Susilo also admitted to operating as a real estate agent without a licence. The siblings were the operators of www.sellhouseseasy.com.au, the logo of which can be seen below. Patricia Susilo was the sole director.
Bryan Susilo's LinkedIn refers to himself as a 'Vendor Finance Specialist (Property)' at 700 Dollar Houses.com. This was the young siblings' first venture into business, with Bryan Susilo still at school when it began - at present he is just 20 years old. In 2009, the Susilos attended a wealth creation seminar of which one of the segments related to rent to buy. They then undertook a course, which began in Sydney for five days. Their parents paid $20,000 for them to undertake this course. Promotion, sales and documentation were discussed at this course, and there was also a lawyer who did a presentation.
The Susilos said that they were taught their current sales methods at this seminar, and this was accepted in Court. They also paid $1,000 a month ongoing in mentoring fees. The business was small, with transaction details of just four properties provided, and the profit they had achieved was not substantial when the costs of operating the business were taken into account.
While it was claimed that they did not know at the time that their actions were misleading, "The Company Website Conduct was deliberate in that Ms Susilo knew that her business did not buy houses and knew that she derived fees and commissions. However, she believed, based on the course she had done, that the business did buy houses in a broader, non-technical sense of the word," according to the judgement.
"Nevertheless, given the defendants' age and inexperience, and what they had been told at seminars, their beliefs might be said to be understandable."
They did accept to know that potential buyers could not purchase properties for the amounts stated in their advertising. They sought legal advice from the lawyer who had presented at the seminars when approached by the Consumer Protection. Up until late-2013, they defended themselves believing they had a strong defence case, with the promoter of the scheme paying their legal fees. This came to an end in November 2013 and they became unrepresented. In January 2014, they made changes to their admissions.
"It is open to infer from the defendants' evidence that there is, or is likely to be, an active rent to buy industry. Some of the participants may have attended the same seminars and may be liable to engage in marketing and promotions strategies that raise questions of misleading conduct under the ACL. That engages the need for general deterrence. In any event, the object of general deterrence applies more widely," continued the judgment.
Their promotional video (below) tells potential clients to think of them as your "friendly real estate pawn shop". It notes they are active Australia-wide, not just in Western Australia.
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There is also another 'About Us' video with Bryan Susilo featuring an introduction about Sell Houses Easy.
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Ordered to pay the penalties by the Supreme Court, it was in relation to the advertising and promotion of rent to buy schemes on a number of properties in both late-2010 and early 2013, with the counsel for the Commissioner for Consumer Protection providing a number of statements that were false, deceptive or misleading.
Some of these included the following:
"Own my home": This was said to provide the wrong impression that prospective buyers could get sole or joint ownership of the homes after signing. This was not the case. They would not be the owners of the properties.
"No banks needed", "Stuff the banks - move in today": This gave the suggestion that a bank loan would not be required. There was no reasonable grounds to make this statement.
"We buy houses": Suggested the promoters could purchase properties immediately. This was not the case.
"We do not charge commission or fees”: Said to be misleading as the promoters do, in fact, get a benefit from the scheme.
"We are part of a group of real estate investors”: False statement. It currently reads the following on the still active website "We're part of a group of real estate investors who buy residential property in all areas throughout Australia! Any price, any condition!"
Similarly, numbers provided that related to the weekly cost to those potential buyers were not found to accurately reflect the true total cost to eventually own a home. Advertisements were seen online, such as on Gumtree, as well as on the listings website www.renttoownhome.com.au.
Justice Beech gave both promoters a three year injunction requiring them to not engage in rent to buy real estate transactions without a licence or without working for a licensee and not to represent that they "buy houses" unless they intend to acquire a freehold title.
They were also told not to represent that they are the owners, jointly or solely, of properties they are selling unless they are the owners, and not to represent to buyers that they can purchase without a bank loan unless there are reasonable grounds for this.
Beech told them that accurate and complete statements of the money payable by prospective buyers under the arrangement must be provided, that rent-to-buy arrangements are not immediate sales of the property and this must be disclosed and that the promoters must also disclose what revenue they will attain from the arrangement.
Anne Driscoll, Commissioner for Consumer Protection, that there is danger in buyers and vendors getting involved in complex arrangements.
“It would appear from our investigations into these rent to buy property schemes that the prospective buyers are at great risk of losing their money and sellers are locked into a fixed sale price for the duration of the contract,” Driscoll said.
“The schemes target people who are desperate and find it difficult to get finance to purchase a home as well as vendors who are having difficulty selling their homes," she said.
“Those who may be contemplating taking part in these schemes should think very carefully and get expert financial and legal advice before signing any contracts. They should treat any claims being made by promoters with scepticism and check to make sure information being provided by the promoter is accurate."
The Supreme Court supported the argument of Consumer Affairs that they were engaged in real estate transactions and should be licensed. The full judgement is available online.
Promoters of these schemes without a licence have also been given a warning that they could face prosecution and penalties if they are currently unlicensed.
The siblings had been on Driscoll's radar since October 2012 when she noted that she was particularly concerned about cases when tenants and buyers did not have sufficient resources to pay upfront option fees, with the siblings taking wedding rings and family collectables including, almost unbelievably, a Real Madrid jersey signed by David Beckham and a Franklin Mint edition Monopoly board. Patricia Susilo apparently also brokered the sale of a tenant's vehicle to raise the deposit funds for a home. They were served an injunction at the time.
"The proceeds from the transactions are deposited into a bank account of a real estate agent in the eastern states and then transferred to Ms Susilo's personal bank accounts in WA. I am concerned that the funds do not go into a WA trust account and there is no separate account where money is stored for future deposits in accordance with the ‘Option to Buy' agreements," Driscoll noted in 2012.
In August 2011, they had warned about No Loan Home Pty Ltd, who traded as Perth's Easyhomes WA, and the rent to buy scheme promoted by Filip Butkovic and Nikola Butkovic. They had been said to mislead clients relating to the future value of the property, potential ewuity and their ability to obtain finance.
Another vendor financing or rent to buy promoter, Rick Otton, recently saw his seminars banned in Western Australia, with Driscoll claiming that West Australian consumers are being misled by the marketing of his scheme with statements including ‘buy a house for one dollar’ and ‘profit without initial investment’, the former being part of his book title also.
He has not admitted any wrongdoing under Australian Consumer Law.
With 'We Buy Houses' and similar signs present in many areas across the states and territories of Australia, including numerous signs in Sydney's western suburbs, it will be interesting to see how whether this action will be rolled out across the board. Property Observer notes that there are a number of similar schemes operating across Western Australia.