Ban on vendor term and rent-to-buy transactions to make buying a home fairer for all Victorians
Consumer Action Law Centre (Consumer Action) supports a ban on vendor term and rent-to-buy agreements in the housing market proposed by the Sale of Land Amendment Bill 2019, which is to be introduced to Parliament today.
The ban was a key recommendation from Consumer Action’s 2015 report, Fringe Dwellings: The vendor finance and rent-to-buy housing black market. CEO Gerard Brody says these transactions have long been problematic for consumers.
“These finance options are usually targeted at low-income earners, playing on their dreams of owning their own home,” he says.
“Most home buyers usually assume that they own the property from the start of the agreement, but this is not the case – they don’t actually own it until all of the payments have been made.”
Brody says these agreements are rip-offs for the home buyers, who are charged extra payments on top of the rent paid and usually end up paying far more than the actual value of the property.
To add insult to injury, he says that because the agreements can be so complex, the legal rights of both parties in the agreement can be unclear or very limited.
“The protections home buyers would usually receive when taking out a mortgage don’t apply to vendor term and rent-to-buy finance agreements.
“Unfortunately, this can mean that buyers end up making significant payments and risk losing them all. Many are forced to vacate the premises if they face financial difficulty, often after being led to believe that they will be able to refinance on better terms.
“Nearly every deal we have seen has been destined to fail from the start because they were unaffordable for the buyer.”
Consumer Action regularly receives calls from consumers facing difficulty with vendor term and rent-to-buy finance agreements. The majority have expressed regret at entering into these agreements, saying they would never have signed on the dotted line had that really understood the implications.
“This unsavoury side of the housing industry has flown under the radar for too long, leaving many Australian families with debt and heartache” says Brody.
“We are pleased to see the Victorian Government taking this step to protect home buyers from dodgy finance options so buying a home continues to be a happy occasion.”
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