Consumer Affairs Victoria is currently undertaking the Consumer Property Law Review. This review has consisted of three Issues Papers, with submissions to the third Paper closing on 13 May 2016. Thirty-one submissions were made. Twenty-seven of which were public submissions that were released last Friday.
What Does This Have To Do With Vendor Finance?
As expected, this third Issues Paper, entitled ‘Sale of Land and Business’ had four, very specific, Vendor Finance related questions. They were:
- What is your experience with buying or selling property under a terms contract? Do you agree that there is a continuing place for such contracts in today’s market?
- Should the current restrictions on sellers under terms contracts be expanded to encompass debt that is not linked to the property but which may impact on the seller’s capacity to pass title to the buyer? If yes, what sources of debt should be included?
- Should there be greater levels of scrutiny applied to terms contracts ‘brokered’ by intermediaries? If yes, what would you favour:
- offences and remedies directed at intermediaries?
- requirements on intermediaries to have contracts of sale independently audited for financial soundness before proceeding?
- other approaches? Please provide your ideas.
- What are your experiences of rent-to-buy contracts? Can you provide any examples where a buyer has successfully purchased a property using the rent-to-buy method?
Rent To Buys (Lease/Options)
On reviewing the twenty-seven public responses to the Paper, every submission that answered the question regarding Rent To Buys, suggested they be regulated (possibly by the National Credit Code) or banned, in the consumer/residential market place.
Terms (Instalment) Contracts
The responses regarding the question; “Do you agree that there is a continuing place for such contracts in today’s market?” were very different. All respondents that answered this questioned agreed that there is a continuing need for Terms Contracts.
I have no doubt more State based reviews will follow this Victorian review. The FBAA’s, Vendor Finance Steering Committee will continue to respond to future Reviews and Papers as they arise.
More information regarding this Issues Paper, including all twenty-seven public responses, can be viewed on the Consumer Affairs Victoria website.
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