What
is a home buy-back scheme?
Home buy-back schemes are schemes where homeowners sell their homes to someone
else, such as a buy-back operator or promoter. Homeowners keep living in the
house and usually pay rent. They are told they can repurchase the house back
in two or three years time at a specified price.
The repurchase price usually includes a large fee, which can be tens of thousands of dollars. The schemes appear to be designed in a way that the homeowner will find it very difficult to be able to repurchase the home.
Once you have
sold your house under a buy-back scheme, unless a caveat is registered,
the person who purchased it from you may sell it or raise a mortgage over
it. If the new purchaser or the mortgage provider does not know you still
have a legal interest in your home, their interest in the land may override
yours. In effect, you may lose your home.
What to look out for
A buy-back scheme is not a loan. A common problem for consumers is that they
believe they are signing up to a loan or mortgage when they are actually signing
up for a buy-back scheme.
Often the buy back operator will arrange legal advice and get the customer
to sign that the advice was independent. The problem is that in using a lawyer
arranged by the buy-back operator, the advice may not be as full and frank
as if a completely independent lawyer is used.
Look out for clauses like:
I was advised to obtain independent legal advice prior to signing the loan
contract …and may have elected not to obtain such independent advice.
In consideration of the lender making the loan I hereby irrevocably waive any
defense or counterclaim against the lender which may arise as a consequence
of me electing not to obtain independent legal advice.
Any clause that says you are waiving your rights to independent legal advice
should be a warning that this is not a company that wants your rights and obligations
explained to you.
Check to see what documents you are being asked to sign. In particular,
look out for any document headed "Agreement for Sale and Purchase" and
any documents that contain the words ‘option to purchase’ or ‘licence
to occupy’ for your home.
You should be wary if you aren’t given copies of all the documents to
take away with you. It’s not acceptable for buy-back operators to say
they’ll post them out later as it makes it more difficult for you to
understand the arrangements and protect your property interests.
What
law covers buy-back schemes?
The operation of buy-back schemes is now covered under the Credit Contracts and
Consumer Finance Act 2003.
The section of the Act that relates to buy-back schemes took effect on 14 October
2003, meaning that consumers now have better
protection
if they are considering entering into such a scheme.
Under the Credit
Contracts and Consumer Finance Act:
· You must be given a copy
of all the terms of the transaction.
· The buy back operator
must ensure that you obtain independent legal advice. The lawyer has to explain
the scheme to you and must witness your signature on the documents. Unless the
lawyer certifies that this has been done, the buy-back operator cannot sell or
mortgage your home without permission from the High Court.
· You may be able to protect
your home by lodging a ‘caveat’ under the Land Transfer Act. A caveat
tells other people that you have an interest in your home, and can make it harder
for someone else to take your home under a buy-back arrangement.
· The Court can cancel
or reduce unreasonable fees charged by buy-back operators.
· The Court can re-open
oppressive buy-back contracts, and terminate them or vary or waive any terms.
If a contract is re-opened, the Court can also award compensation or damages,
and can ban buy-back operators from offering financial services in the future.
The new rules about telling consumers about the terms and conditions of credit
contracts, independent legal advice and unreasonable fees apply to buy-back
schemes entered into after 14 October 2003. The re-opening provisions apply
to all buy-back schemes, including some schemes entered into prior to 14 October
2003.
What should you do if you are involved in a buy-back scheme or are
thinking about getting involved?
If you’re thinking about buying a home or entering into a buy-back
scheme, you should always seek advice from a lawyer you have chosen before
you sign
anything.
Always get copies of the documents to take away with you. "We’ll
put them in the post" is not good enough.
If you have entered into a buy-back scheme you should seek independent legal
advice immediately.
The Credit Contracts and Consumer Finance Act is enforced by the Commerce Commission
and there are tough penalties for buy-back operators who break the law. If
convicted, buy-back operators can be fined up to $30,000, or may be prohibited
or restricted from carrying out buy-back practices. You can report breaches
of the Act to the Commerce Commission.
Contact the Commission’s contact centre – phone 0800 943 600,
email contact@comcom.govt.nz or write to PO Box 2351, Wellington.
So how
can we help?
We can help
refinance a buy-back scheme (subject to credit criteria)
First we will need to assess your financial position
and
advise
you
on your
options.
Over the years as a mortgage broker I have helped save 107 homes for mortgagee sale and saved hundreds of thousands of dollars in equity - I may be able to help you.
The above is for information purposes only and not to be taken as advice. For detailed advice on your situation -
Call us on 0800 ADVOCO (0800 238 626) or email us.
Some of the 107 homes
Steve has saved from the auctioneers hammer!
King
George Avenue, Epsom.
Williamson
Avenue, Grey Lynn.
Khyber
Pass, Grafton.
Ivy
Place, Birkdale.
Evandale
Street, Glen Innes.
Whangaparaoa
Road, Whangaparaoa.
Layton
Road, Manly.
Kenwick
Place, Pakuranga.
Scenic
Drive, Swanson.
Port
Waikato Road, Tuakau.
Layton
Road, Manly.
Eyre
Street, Henderson.
Edinburgh
Street, Pukekohe.
Ivon
Road, East Tamaki.
Hillsborough
Road, Mt Roskill.
Israel
Avenue, Clover Park.
Dawson
Road, East Tamaki.
Howell
Street, Mt Roskill.
Lake
Road, Devonport.
Rangatira
Road, Birkdale.
Levesque
Street, Birkdale.
Alidade
Place, Massey.
Otaua
Road, Waiuku.
Ambler
Avenue, Glen Eden.
Trojan
Crescent, New Lynn.
Halsey
Drive, Lynfield.
Staincross
Street, Titirangi.
Camphora
Place, Ranui.
Chapman
Road, Te Atatu Peninsula.
Tennessee
Avenue, Mangere East.
Newham
Place, Henderson.
Lockhead
Road, Te Puna.
Landette
Road, Manurewa.
Brain
Road, Kelston.