26 August 2009 | Companies fined thousands for rent-to-buy scheme
The Southland Times reports that two southern companies have been fined thousands of dollars after admitting "selling" homes as rent-to-buy without transferring the ownership to the buyer.
Judge Kevin Phillips said in the Invercargill District Court that the scheme had targeted vulnerable low-income people who thought they had bought the houses.
Three companies, Invercargill Property Management and Southern Housing Group Ltd, which were no longer trading, and Newfoundland Ltd have admitted charges relating to breaches of the Fair Trading Act.
Charges faced by the fourth company, CMA Property Investments Ltd, are still before the courts.
The Commerce Commission this week dropped personal charges against Glen Herud, the director of the two southern companies at the centre of the case, saying he had co-operated fully with the commission and had agreed to give evidence with respect to a similar scheme in Auckland.
The Commerce Commission said CMA Property Investments and Newfoundland were investor companies that bought property or properties and engaged Invercargill Property Management Ltd to manage them.
Invercargill Property Management advertised the housing scheme between February 2003 and January 2005, conveying the concept of house ownership to prospective buyers when, in fact, it did not equate to legal owner-ship.
Southern Housing Group operated in a similar fashion to CMA and Newfoundland Ltd but dealt with only one property.
Most of the charges related to advertising in The Southland Times, while the remainder were based on signs placed outside the houses.
Judge Phillips said most misleading was the fact the occupiers were under the impression they had bought the houses.
For many of the victims, the houses represented their first home, and discovering they did not actually hold the legal title had had a significant impact on them.
Invercargill Property Management admitted seven charges of breaching the Fair Trading Act and was fined $5500 on each charge.
It was also ordered to pay a total of $25,000 reparation, to be shared between its four victims.
Southern Housing Group also admitted one charge of breaching the Fair Trading Act and was fined $10,500. It was ordered to pay $5000 reparation to a victim.
After the hearing, Glen Herud said he had never intended to mislead anyone and thought he had been acting ethically.
In hindsight, he was naive and shouldn't have gone near it, he is reported to have said.
All except one of the people who signed up to a house in the scheme had made between $15,000 and $80,000 in capital gain, he said.
"I haven't gone out there to rip anyone off. In fact, I thought I was giving these people a really good opportunity to own their own home."
Newfoundland was fined $13,500 and ordered to pay $10,955 reparation to one victim. while charges against CMA Property Investments were adjourned to October 16.