In an earlier edition of VFI News entitled The Writing’s On The Wall, I referred to situations where you as a vendor financier, don’t own the property, i.e. you’re ‘standing in the middle’, helping a seller, sell to a buyer using vendor finance.

The situation regarding Licensing is very different if you are the owner of the property.

When Am I Regarded As The Owner?

Is it:

  • at exchange of contracts,
  • at settlement (also called ‘completion’),
  • or when your name goes on the Title?

I’m sure a lot of solicitors could fill up many pages on this issue 😉 but very generally, a lot of government departments regard you as the ‘owner’ at exchange of contracts.

Selling YOUR Property With A Rent To Buy

You do not need a Real Estate Agent Licence to lease/option a property YOU OWN.

Selling YOUR Property With A Credit Contract

When you sell a property YOU OWN with a credit contract you need ACL coverage if you, as ‘the credit provider provides the credit in the course of a business of providing credit ….’.

Recently, in the NSW Supreme Court, there has been a case where the defendants alleged, in part, that the plaintiffs required ACL coverage to sell them a property, the defendants had only owned for a couple of months, with a credit contract (an Instalment Contract).

The Court ruled (in Gray v Latter [2014] NSWSC 122) that the Owner of a property was not in contravention of the National Consumer Credit Protection Act because:
“60. I do not consider that the defendants have established that the plaintiffs were engaged in other than an isolated transaction for personal reasons. They were not conducting a business of providing credit; nor were they engaged in trade or commerce: O’Brien v Smolonogov (1983) 53 ALR 107.”

I’m no lawyer but, if you’ve owned the property for a while, it’s likely all you are doing when you sell this property with a credit contract, is disposing of an asset.  Not, providing ‘credit in the course of a business of providing credit’. That is, it’s unlikely you would need an ACL to conduct this transaction.

But the Consumer (Buyer) Still Gets the Protection of the National Credit Code

I believe the Government and the Courts are never going to reduce a consumer’s rights under the Code, just because the credit provider may or may not require ACL coverage. So, while the credit provider in this situation may not need ACL coverage, the transaction needs to be conducted as if ACL coverage was in place.

Selling Multiple Properties With A Credit Contract

If you purchase multiple properties and then quickly sell them with a Credit Contract, you’ve got to ask yourself are you, as the credit provider, providing ‘the credit in the course of a business of providing credit’?

If I could not prove I was simply disposing of an asset, I believe I would need an ACL, with the correct authority, to undertake these multiple transactions, using credit contracts.

NB Please take all the above as personal opinion and ensure you get independent legal advice on all the issues mentioned here.

What About Companies and SMSF’s that I Own?

Thanks to one of our readers for the following clarification regarding Companies & SMSF’s and RE Licensing.

When [Lawyer] and I spoke to Fair Trading in NSW and the Office of Regulatory Services here in the ACT, about when a licensed estate agent (not a licensed sales person) is needed both said (and we got it in writing from both), that “personally owned” also included being in a company name that we are both members/directors of, and our SMSF – it did not have to be in only our personal/individual names – as long as the names on the title deed were the people selling, we did not need a Real Estate license.

However both gave us a warning, i.e. do not act like you are or we will deem you to be acting as a REA without a licence. This meant, not advertising in major real estate publications (they both verbally named as an example) without clearly saying ‘private sale.’ And it did not matter if we sold 1 or a million properties, we have to make sure that the person looking at the property does not in any way think we are licensed agents. ORS, in Canberra, also verbally stressed that this also included making sure people did not think we are licensed real estate salespeople in addition to licensed agents.

Vendor Finance Management

All Vendor Finance Management (VFM) clients enjoy the confidence their vendor finance credit transactions are being administered in accordance with the NCC. If you’d like to experience the convenience of out sourcing your transaction administration and fine tune your Application and Qualification procedures, Vendor Finance Management can help you.