Blitz on illegal sales

[essence]

Feb 6, 2011

The Real Estate Agents Authority has laid charges against a Wellington property company for allegedly buying and selling property without a licence.

The action is part of a wider investigation by the authority into property investment groups and a crackdown on illegal trading.

Charges were laid in the Lower Hutt District Court before Christmas against Petone company Home Buyers and its director Francisca Forster. The first hearing is due in four weeks.

Section 141 of the Real Estate Agents Act 2008 says it is an offence to carry on the business of a real estate agent without being licensed.

The real estate industry watchdog has said there is an issue around how traders who offer investment properties to mum-and-dad investors fit within the legislation.

The variety of schemes broadly fall into two categories - finders, who aim to buy and sell a property within days under what is called a contemporaneous settlement, and traders, who take possession of an investment property then on-sell it, often with a guaranteed rental income stream.

One of the most high-profile investment schemes was Blue Chip, a complex web of entities that collapsed three years ago leaving thousands of small investors out of pocket. One of the problems with the scheme was that it didn't fall under any particular piece of legislation.

Home Buyers claims to buy houses from owners in tight situations. "We specialise in finding creative solutions to real estate problems that others won't touch," its website says. "We can pay all cash, take over your payments or lease-purchase your house immediately!"

On the other side of the equation, Home Buyers says it works with "buyers who we can move into the property quickly before they complete the tedious application and loan processing delays [sic]".

"Some need time to alleviate a shortage of down-payment or to solve credit issues."

After buyers move in it then works with lenders to get them "pre-qualified" for a loan.

If home owners have no mortgage, Home Buyers will pay them cash for their equity.

It has the "team players" to settle transactions quickly, including lawyers, lenders and mortgage brokers.

Blue Chip targeted cash-poor older homeowners, getting them to use the equity in their homes to buy investment properties. One of its hallmarks was that investors were encouraged to get legal advice from Blue Chip-friendly lawyers. Victims of the scheme have since brought successful legal action against several of those lawyers.

Property investment schemes are exempt from the Securities Act, and there is no requirement for operators to back up features of the schemes such as promises of lease-backs and rental guarantees.

It is also not clear whether such schemes are covered by the new financial adviser regulations.

The REAA says its investigations are ongoing.

[One]

I love that. Let's tar all property finders with the blue-chip brush!

Anyone got any actual info about this company?

[Mr$]

In October 2010 the REAA been asked to comment about there position re Property Finders.

Mr Michelle Hawes REAA Complaints administrator reply is " The authority is looking in to the matter and once determination is made the position of the authority will be made available"

Nothing is been made available publicly and the way REAA is trying to pin down property Finders and Traders is shameful!!!!!

One cannot compare property Finder / Traders to Blue Chip conducts etc.

This is a Free country and Buying and Selling property should be no issue, same like buying and selling Vehicles or antiques etc.

A property Finder / Trader should NOT be compare or deemed to be Financial adviser or RE agent.

[halfempty]

This really is insane to compare "Blue Chip" with a one man band property finder.

Really stupid reporting.

Property finding, bird dogging, trading what ever you want to call it has just been regulated out of the industry.

It does surprise me that the REAA decided to hang their hat on convicting this case.

You would think for a first trial case they would look to convict a very high profile trader, or someone who has been outwardly fraudulent in their activities.

But I suppose this is what you get when the regulators don't know what the regulations mean.

[[email protected]]

This is my email from the 7th January 2010. REAA said they would "come back to me". Continued attempts to get them to even talk to me have been ignored.

Them pursuing this but ignoring constructive solutions by myself and others is simply unacceptable.

Anyone have any bright legal/media ideas to expose this.

-----Original message-----
From: Dean Letfus <[email protected]>
Sent: Wed 06-01-2010 16:50
To:
Subject: Areas of concern

Hi XXXX and thanks so much for your time the other day.

My areas of concern that I would love to try and resolve are below. I have even thought of forming an association that people could join with a code of conduct agreed by REAA as being acceptable as a possible solution?
Anyway:
1. Double or contemporaneous settlement. Property traders are in the business of purchasing property unconditionally and then onselling it with both transactions settling on the same day. Historically this has fallen completely outside the act because it was 2 private unconditional contracts and was clearly not a real estate agents activity. Generally a trader would secure a property considered under valued and then advertise it privately to find a buyer.
2. Assignment. Property finders have traditionally operated as sourcing agents in the sense that they would be asked to find a property with particular yield or equity. The finder would negotiate the contract to a conditional stage and then assign the contract to a third party for a fee. Historically this was deemed to be an assignment of a contract, not a property transaction therefore fell outside of the act. REINZ did try a test case against a somewhat unethical finding business and they engaged the services of a prominent QC who concluded that finding was outside the act and told REINZ to pull their head in. Thus finders have operated freely in the NZ market place without impediment.

In both the above cases tax is paid on all profits and GST is applied so there is no avoidance. Many people like to use finders and traders because of their negotiation skills and would not use agents to invest through as the agent is by definition operating in the interests of the vendor. We operate in the interests of completing a transaction acceptable to both parties or specifically for the buyer.

Property traders/finders are an industry in New Zealand operating from Cape Reinga to Bluff. I train them all over New Zealand and speak on such matters frequently. I would therefore like to find a way for this industry to operate legally under the new act. My initial position was that as these processes clearly fell outside of the old act there was no reason to assume they should now suddenly be included so business as usual. But due to the vague wording of much of the act I feel I must try and find a workable resolution with REAA to protect myself and traders nationwide.
I wonder whether a binding code of conduct might be able to be developed to define what is considered in and out of the act without expensive litigation that could be agreed upon and registered through a suitably set up “property Traders” organisation

Please advise if you think I should also pursue this with any lobby groups or other related parties, otherwise I hope your legal team may be in touch J

[spaceman]

Yeah ....BUT

.......
This is a Free country and Buying and Selling property should be no issue, same like buying and selling Vehicles or antiques etc......
.

If you buy and sell vehicles for a living you are supposed to be licensed ...... why should it be any different for buying and selling property????

Cheers
Spaceman

[halfempty]

Yeah But but

When you buy a car off a "part time working form home car trader" you can state and reasonably expect the transaction to me "as is were is".

Without being dragged to court and in fear of a $40,000 fine.

[Mr$]

Buying and selling Property is like buying and selling any Commodity of life.

One doesn't require a license to sell his car 2-10 a year if they wish to do so.

a Purchaser have the option to carry there own Due Diligence prior to purchase and IS NOT acting behalf of anyone in terms of providing a service / working for the vendor like a Registered RE agent under the REAA.

Anyone have any bright legal/media ideas to expose this

Good Idea Dean!! Go to the media and raise your opinion, will sure support you on that.

The writer of this article is not write to compere Traders to Blue chip scandal, it is just putting fuel on the fire as far as traders are concerned.

[spaceman]

You don't need a license to sell your properties either.

Not sure if you don't understand the point or don't want to understand it.

Simply it is illegal to be an unlicensed car dealer .... yes there is some wiggle room to enable legitimate private sellers to be able to buy and sell cars ..... but a dealer is supposed to be licensed.

In exactly the same way what is wrong with letting genuine private buyers and sellers of homes do as they always have and require those that do it for a living to be licensed???

Cheers
Spaceman

[halfempty]

This pending court action also makes me wonder who made a complaint over this transaction in particular and why?

I know that anyone can make a complaint, but then if so wouldn't it be rather normal for an aggrieved agent who feels they have been "Done out" of a commission?

It's also worth noting that this is simply an up coming court action and that the parties involved haven't had their day in court yet and so thy can be considered innocent of all charges.

Although if they are found innocent I doubt if the Herald will be printing a follow up story to correct itself.

[halfempty]

You don't need a license to sell your properties either.

Not sure if you don't understand the point or don't want to understand it.

Simply it is illegal to be an unlicensed car dealer .... yes there is some wiggle room to enable legitimate private sellers to be able to buy and sell cars ..... but a dealer is supposed to be licensed.

In exactly the same way what is wrong with letting genuine private buyers and sellers of homes do as they always have and require those that do it for a living to be licensed???

Cheers
Spaceman

OK so where's the line in the sand?

The REAA don't know and the best minds on this forum and in RE in New Zealand can't figure it out.

A number of traders I've spoken to don't have a clue so they tend to ask for advise from their lawyers and get either a blank stare or the "We will need to see some case law" line....

[spaceman]

A bit confused???

When you buy a car off a "part time working form home car trader" you can state and reasonably expect the transaction to me "as is were is".

Without being dragged to court and in fear of a $40,000 fine.

Why would the buyer be dragged into court???? .....surely if the seller is found to be an unlicensed car dealer then it's fair enough the he/she ends up in court.

There is a law that applies when buying and selling cars ..... if you break the law expect to end up in trouble eventually ...nes pas???

I see this a bit like traders trying to claim they aren't really traders and thus don't have to pay tax on their profits. We've all heard stories or "know somebody" that has sold properties at a profit and hasn't paid tax when they should have ........ once again the rules are fairly clear .... if you do it for a living (or your intent was to sell at a profit) you pay income tax, if you don't the capital gain is tax free.

Cheers
Spaceman

[Mr$]

have and require those that do it for a living to be licensed???

mmm im not sure but perhaps, but NOT under the REAA, others, who license the car dealers?

[spaceman]

100% agree...

OK so where's the line in the sand?

The REAA don't know and the best find on this forum and in RE in New Zealand can't figure it out.

A number of traders I've spoken to don't have a clue so they tend to ask for advise from their lawyers and get either a blank stare or the "We will need to see some case law" line....

...that it is a very sucky place to be in, where you don't know where the line in the sand actually is.

There will probably be people ticked off no matter where the line ends up.... maybe even me .... but I agree in the principle of drawing that line.

Do I think it's being done very well ...... not at all..... I think it's very poor that somebody like Dean can't a straight answer.

I had a mate about 15 or so years ago that had a plan to introduce internet gambling in NZ (before anybody else had), he asked the powers that be if he could do it legally...... they refused to say if he was inside or outside of the law and told him to go ahead and they would decide later and there would be no get out of jail free card if they did decide against him.

Cheers
Spaceman

[halfempty]

It's the same old thing lets have a rule, but not a law.

We get lumbered with regulatory legal definitions that can be argued either way in great depth by expensive council on both sides.

And the ultimate decisions are made by the judiciary who are the most clueless of the lot and simply try to interpret the global meaning of the act.