A property spruiker who claimed people could buy a house for $1 have been fined a record $18 million for misleading consumers.
The Federal Court imposed the fines on Rick Otton and his company "We Buy Houses" after an investigation by the Australian Competition and Consumer Commission (ACCC) and New South Wales Fair Trading.
The record $18 million fine imposed for misleading property buyers and investors proves that urgent regulation of property investment advice is needed, according to the Property Investment Professionals of Australia (PIPA).
PIPA Chairman Peter Koulizos said the record fine was a sign that the ACCC was serious about taking action against unscrupulous operators promising an unachievable level of financial success.
“Hats off to the ACCC for staying the course on an investigation that began in 2015, which has resulted in $18 million-worth of penalties,” Mr Koulizos said.
“Unfortunately, there remains far too many crooks working in our industry.
“That’s because there isn’t any property investment advice regulation, which creates a breeding ground for greed and bad behaviour, with the general public the ultimate victim.”
Mr Koulizos said property investment was a long-term wealth creation strategy, with most successful investors owning property for 20 years or more, so anyone promising short-term profits was a spruiker not an expert.
Mr Rod Simms ACCC Chairman said
"We Buy Houses and Mr Otton peddled false hope to people simply looking to get a foothold in the housing market or invest money in real estate for their future,"
"It was a very sophisticated marketing approach using very complicated terms but ultimately it didn't work and it cost Australian consumers a lot of money."
"Between 2011 and 2014, We Buy Houses made $20 million running free property seminars, $3,000 bootcamps and mentoring programs that people paid up to $26,000 to attend."
According to the ACCC, We Buy Houses and Mr Otton taught real estate investment strategies via free seminars, and paid “boot camps” and mentoring programs that claimed people could:
- buy a house for $1, without needing a deposit, bank loan or real estate experience, or using little or none of their own money
- create passive income streams through property and quit their jobs
- build a property portfolio without their own money invested, new bank loans or any real estate experience, and
- start making profits immediately and create or generate wealth.
Because of the paucity of legislation, Mr Koulizos said PIPA was created so that property buyers could have confidence they were dealing with an ethical professional when investing in real estate.
PIPA has developed codes of ethics and conduct, which all of its members voluntarily agree to abide with, as well as professional standards of accreditation and education for the property investment industry, including a Qualified Property Investment Adviser accreditation course, he said.
"PIPA offers investors’ confidence in a marketplace where trust is so lacking and where multimillion-dollar fines to spruikers highlight what is at stake," Mr Koulizos said.
"Whether they're looking for a property investment adviser, mortgage broker or accountant – essentially any professional involved in the property investment process – investors should look for the PIPA logo.
"PIPA members must adhere to our strict code of conduct, which offers property investors the best assurance that they are dealing with a trusted professional."