Three of Australia’s state governments have resorted to direct measures to warn property spruikers of the potential legal ramifications of their actions.
The state governments of New South Wales, Western Australia and Victoria have sent letters to property spruikers operating within their jurisdictions, warning them to abide by Australian Consumer Law or face harsh fines as high as $1.1 million.
The property spruikers in question are reportedly some dozen or so high profile figures, some of which run national operations. There are concerns that said spruikers employ free seminars to pressure attendants into making purchases, or dispense unsound investment advice that could lead to major financial losses for participants. There are also concerns that investors are not made aware that those operating in this space must give a 10-day cooling off period.
Heidi Victoria, Victoria’s Consumer Affairs Minister, said she was particularly concerned about property spruikers convincing people to make investments using monies from their self-managed super funds (SMSFs), saying that not enough investors understand their rights as consumers, or realise they should seek legal and financial advice.
Since the beginning of this year, there have been numerous crackdowns on property spruikers. Victoria led a nation-wide effort at the start of this year, bringing together the ministers of consumer affairs departments from around the country to put together a concerted campaign.
Over a dozen nation-wide organisations were targeted out of a total of around 60 known to authorities, with the Western Australian Consumer Protection Commissioner, Anne Driscoll, turning to the Supreme Court to stop three businesses engaging in rent-to-buy arrangements.
Authorities in Western Australia also managed to compel seminar speaker Rick Otton to agree to cease staging his events in the state, as well as refrain from selling his book How to Buy a House for a Dollar for a two-year period.
DomaCom's head of sales and marketing, Warren Gibson, has also spoken out about driving out the spruiker element, urging financial planners, accountants and mortgage brokers to get behind the drive to regulate the investment property sector by joining the Property Investment Association of Australia (PIAA ) or the Property Investment Professionals of Australia (PIPA).
Gibson said if investment professionals support PIAA and PIPA, they can not only help protect their client base, but also increase client reach and extend their revenue potential.
“Much has been written about investing in the property market, particularly in relation to the SMSF sector with concern voiced from many quarters about its appropriateness (given the high cost of property and its potential to overweight portfolios) and the lack of regulation surrounding property," said Gibson.
“Investors are warned to beware setting up a SMSF for a single property asset, and of the dangers of a lack of liquidity in their portfolio.”