The spotlight will be on ‘vendor terms’ home sales in a new case before the Victorian Civil and Administrative Tribunal (VCAT). ‘Vendor terms’ contracts are an alternative to mainstream bank mortgages where the seller finances the purchase. Increasingly, these deals are promoted by intermediaries and can involve the buyer essentially paying an above market rent for a number of years, during which time they try to secure mainstream funding to purchase the property. Sadly, the plans often come apart at the seams leaving the dream of home ownership well beyond reach.
An application was lodged with VCAT after Ms Sheree Becker, and her company Again Investments Pty Ltd signed up Ms Fiona Ralph, a single mother of two children whose only income was Centrelink benefits, to a $309,000 ‘rent to buy’ contract. The claim also involves the owner of the property, Halit Pty Ltd, which has a relationship with Ms Becker and her company.
The case alleges that Ms Becker engaged in misleading and deceptive conduct by telling Ms Ralph that she could secure financing to complete the purchase of the house within three years when it was clear that Ms Ralph’s personal circumstances meant this wouldn’t be possible.
‘You’d only need a quick look at our client’s income and expenses to know that no responsible lender would loan her the $289,975 that she needed to buy the house, especially when that constitutes 100 per cent of the property value,’ said Mr Brody.
Ms Becker is also accused of unconscionable conduct. It is alleged she knew Ms Ralph was vulnerable and looked to profit from the situation. The application claims that Ms Becker knew of Ms Ralph’s financial circumstances and that she was unlikely to find her a loan, but went ahead with the deal regardless and without warning Ms Ralph of the risks.
‘Ms Ralph was shut out of mainstream credit and it’s not surprising that she’d jump at the chance to own her own home. But the deal she was talked into had no basis in reality.
‘Essentially Ms Ralph paid over the odds for rent while looking for financing that she was never realistically going to get. On top of this, Halit Pty Ltd took a $3,000 deposit, a $990 application fee, and a payment of $7,000 when she received her first home owners grant.
‘It’s heartbreaking to see low-income earners sold false hope in this way. And we’re not talking small sums—Ms Ralph invested over $60,000 in this deal before it went belly up. That’s a huge amount of money for someone on such a low income,’ said Mr Brody.
Ms Ralph is seeking $60,815.10 in damages.
Mr Brody has a warning for others considering ‘rent to buy’ or ‘vendor terms’ deals. ‘These deals can be expensive, risky, and often promoted by spruikers seeking to profiteer from short-term deals. Unlike a traditional mortgage, consumer protections can be limited and the buyer’s name is not even put on the title until they have purchased the home outright.’