Promoters of 'rent to buy' property scheme named

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Promoters of a Rent to Buy property scheme have been named by Consumer Protection, which has issued a warning to potential buyers not to deal with the company.

Commissioner for Consumer Protection Anne Driscoll claims No Loan Home Pty Ltd, sole director Filip (Fil) Butkovic and employee Nikola (Nik) Butkovic, of Nedlands, have been misleading consumers and carrying on business as real estate agents and sales representatives without a licence.

No Loan Home Pty Ltd, the proprietor of the business Perth’s Easyhomes WA, operates a website which lists WA properties available for sale under a Rent to Buy arrangement. An investigation has discovered that at least four of the properties on the site are actually not for sale and, in some cases, owners had rejected approaches to consider rent to buy options.

Under the scheme being promoted by No Loan Home, the buyer pays an upfront Option Fee to the business of about $15,000, as well as an ongoing fee, a proportion of which is to be credited towards the final purchase of the property. The buyer is required to sign a tenancy agreement with the seller in which rent is payable until the end of the contract period, usually four years, when the option to purchase is to be exercised.

“We believe some parts of this tenancy agreement are illegal and therefore the agreement does not provide proper protection to either party,” the Commissioner said.

“Buyers who default on their tenancy agreement or can’t get finance to buy the property at the end of the option period are at risk of losing the money that was intended to go towards the purchase.

“Money paid by the buyer does not appear to go into a trust account and there is very little accountability of where the funds go or any system in place to keep track of the ongoing option payments.

“There are disadvantages for the seller too as they are locked into what is effectively a long-term settlement period in which the purchase price is fixed and the property could possibly appreciate in value during that time. They are unable to sell to any other person during that period, even if their financial situation requires them to liquidate their assets.

“While the Department begins legal action in the Supreme Court to force No Loan Home Pty Ltd to discontinue its current business activities, I believe it is imperative for potential buyers and sellers to be aware of our concerns about the scheme being promoted by the Butkovic brothers.

“The promoters take advantage of vulnerable people who are finding it difficult to either sell or buy a home and the scheme does not appear to have any legal legitimacy. Of concern is the fact the promoters encourage some potential buyers to apply for credit cards if they can’t obtain a normal bank loan for the initial Option Fee.

“We believe the type of transactions carried out by No Loan Home requires a real estate licence and practice certificate. It appears that No Loan Home is breaking laws in this area which are aimed at protecting consumers.”

As a general warning, the Commissioner urges consumers considering a rent to buy scheme as a way of getting into the property market to carefully research the contracts and get legal and financial advice from reputable licensed professionals.

“Prospective sellers and purchasers should ensure that they get the right advice before committing to a Rent to Buy scheme. The legality of elements of these schemes is unclear and may depend on the specific arrangements for each scheme. I would encourage anyone who has had dealings and concerns with a Rent to Buy scheme to provide the details to Consumer Protection for review.” Ms Driscoll said.

Consumers considering a Rent to Buy scheme should first obtain information and advice from Consumer Protection on 1300 30 40 54 or


NOTE: Audio grabs of the Commissioner, buyer and seller talking about this issue are available

(Consumer Protection is a division of the Department of Commerce)

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Media Contact: Alan Hynd
9282 0961 or 0429-078791

Background information about the nature of “Rent to Buy” schemes:

There seem to be different versions of “Rent to Buy” schemes but with similar elements. The schemes generally are marketed to potential purchasers who have difficulty obtaining finance from more conventional sources.

  • A seller signs up with a consultant to sell a house using a Rent to Buy scheme.
  • The house is advertised for sale on various websites.
  • A prospective buyer enters into a lease agreement to live in the house with an Option to Buy the house. The lease and the Option to Buy may be negotiated for any length of time but is usually two years to five years, depending on the situation. 
  • The prospective buyer pays an initial Option Fee directly to the consultant. The initial Option Fee is subtracted from the purchase price of the house, reducing the amount received by the vendor. The initial Option Fee is likely to be about 3% to 5% of the purchase price.
  • The prospective buyer then moves into the house as a tenant and begins to pay rent in accordance with the lease agreement. Title to the property remains with the seller.
  • The prospective buyer also pays an ongoing Option Fee on a regular basis, which is subtracted from the purchase price of the house when the purchase is eventually settled. The ongoing Option Fee during the full period of the lease is likely to be 12% and 15% of the purchase price. It is important to note that, while the ongoing Option Fee is contributing to the purchase price of the house, the rent paid under the lease agreement is not.
  • At the conclusion of the lease period the purchaser can buy the house at the purchase price agreed to in the Option to Buy, minus the initial Option Fee and the ongoing Option Fees paid by the purchaser..
  • At the end of the option period the purchaser enters into a standard Contract for the Sale of Land or Strata Title with the vendor.
  • Settlement is then supposed to occur provided the purchaser has strictly complied with all the stringent rules in the lease and option agreements.

Issues and Pitfalls as identified by Consumer Protection:

There are some issues and pitfalls with Rent to Buy schemes of which potential purchasers should be aware:

  • If the purchaser is unable to continue with the actual purchase, the initial Option Fee and the ongoing Option Fee or Security Deposit is not refunded.
  • By accepting the Option Fees, the consultant may be acting in breach of the Real Estate and Business Agent's Act 1978 and standard fidelity guarantee protections offered under this Act, available to persons who sell or purchase their property through a licensed real estate agent; are not available to sellers or buyers who participate in Rent to Buy schemes.
  • In most cases, there is no tracking of progress in regards to ongoing Option Payments. Further, the ongoing Option Payments, which are intended to contribute to the purchase price, are not secured in a trust account.
  • Rent to Buy schemes tend to be promoted to purchasers who have difficulty obtaining other types of finance for houses. As such, there is no guarantee that the purchaser will be able to get a conventional housing loan at the end of the option period.
  • Depending on the details of the scheme, the consultants negotiating Rent to Buy schemes may require a real estate agent’s licence and triennial certificate.
  • Depending on the contracts tendered by the consultant negotiating the scheme, vendors may be in breach of the Residential Tenancies Act 1987.
  • The buyer and seller are agreeing to a sale price when settlement could be up to five years away. Either party may be disadvantaged if the final sale price at settlement does not reflect the property’s current market value.
  • Sellers are bound to the contract for what could be a long period of time, during which they are unable to sell their home and liquidate their asset.
Consumer Protection
Media release
09 Aug 2011

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