PROMOTERS of property investment schemes have been warned by Fair Trading NSW to operate legally or face sanction.
Australian Consumer Law regulators from around Australia have worked together to examine the practices of a number of promoters.
NSW Fair Trading Commissioner Rod Stowe said a common theme was consumers being misled about the financial benefits of buying into a particular scheme.
"Regulators across Australia have initiated court action to stop promoters who promise financial benefits they cannot deliver on, or who fail to tell people about their cooling-off rights to get out of a service they were pressured into buying at a 'free' seminar," he said.
Regulators closely examined the activities of traders between 2013 and 2015. Twenty traders received legal notices requiring them to substantiate claims made in advertisements and at their seminars. This prompted legal action against at least 10 entities and their associates.
Sixty-seven education/warning letters were also issued.
"We are sending the message to the industry that they have to act fairly with consumers or face action by consumer law regulators using the Australian Consumer Law," Mr Stow said.
"Failure to do so will render the promoter liable for civil and criminal penalties, in some instances up to $1.1 million for a corporation and $220,000 for an individual."
Before buying an investment property from a property promoter, consumers should conduct their own research and always obtain independent financial and legal advice. Consumers should also be wary of::
- High pressure sales tactics characterised by rushed decision making and contract signing and the payment of fees (including discounts offered to seminar attendees who sign up on the day).
- Inferences that a system is "government approved".
- Claims of capital growth rates that may not be independent or credible.
- Spruikers who don't allow questions or who ignore or downplay the risks and costs involved.
- Spruikers who suggest specific investment opportunities such as a particular property development, as they may be receiving a commission or have an undisclosed interest in it.
- Spruikers pushing people to buy properties interstate that cannot be seen, or off-the-plan properties that do not yet exist.
- Spruikers requiring participants to sign non-disclosure agreements.
If, in conjunction with the sale of goods, services or real estate, the promoters engage in credit or financial services, including financial advice in relation to self-managed super funds, they need to operate within the laws that cover the provision of credit or financial advice, administered by the Australian Securities and Investments Commission.
ASIC has recently taken a number of actions against entities for providing advice on self-managed super funds without being licensed and for misconduct under the Australian Consumer Law and consumer credit laws.
Some scheme promoters also need to be licensed by state agencies to promote property sales.
Information on the Australian Consumer Law is available at www.consumerlaw.gov.au
NSW Fair Trading, 133-220, www.fairtrading.nsw.gov.au
