Fourth Company Fined in Housing Scheme
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."
Background
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.
ENDS