01.Consumer Protection WA clamps down on dodgy operators
Rent-to-buy schemes are on the rise and have long been a dodgy prospect for desperate house-hunting consumers. Now Consumer Protection in WA is clamping down on some of the typical tactics.
What is a rent-to-buy scheme?
Rent-to-buy schemes, also called rent-to-own schemes, target people who don’t qualify for home loans – people with low income, who are unemployed, can’t save a deposit or have a poor credit history. Buyers agree to pay rent to the seller in return for an option on buying the property at a later date.
What are the potential issues with rent-to-buy schemes?
There are many potential pitfalls for buyers who may find they lose all the money they’ve paid if they can’t meet repayments or can’t get finance when it comes time to transfer property ownership. They may also find the value of the home is less than the projected value that was agreed upon initially. Potential buyers are misled into believing they are joint owners of the home, and in some cases the "vendors" don’t even own the home they’re "selling".
Home sellers also in danger
It’s not only home buyers targeted by these schemes – home sellers are targeted too, with ads like "We buy houses", promising "No fees or commissions". In such cases the rent-to-buy operator doesn’t actually buy the house and acquire the title, but effectively rents it and then sub-lets to the "buyer".
Consumer Protection WA takes action
Consumer Protection in WA has initiated court proceedings against individuals operating several rent-to-buy schemes, resulting in charges of misleading and deceptive conduct, with individuals charged for operating as unlicensed real estate agents.
Commissioner for Consumer Protection Anne Driscoll warned consumers, “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.”
For more on these and other home loan types, see the Australian Securities and Investments Commission (ASIC) page on Choosing a home loan. For information on managing debt (including how to check your credit history) see our Borrowing page.