Real estate investment company We Buy Houses Pty Ltd and its sole director, Rick Otton, were fined penalties totalling a record $18 million by the Federal Court. The penalties were charged to the company and Director for making false or misleading representations about how people could create wealth through buying and selling real estate.
The Federal Court decision of $12 million imposed against We Buy Houses Pty Ltd and $6 million imposed against its sole director Mr Otton are the highest ever levied for contraventions of the Australian Consumer Law by a corporation and an individual respectively.
Furthermore, the Federal Court imposed a 10-year ban on Mr Otton from managing corporations in the country. Mr Otton and We Buy Houses are also permanently restrained from further involvement in the supply or promotion of services or advice concerning real property transactions or investment.
The Australian Competition & Consumer Commission (ACCC) Chair, Rod Sims, stated, “We Buy Houses and Mr Otton peddled false hope to people simply looking to get a foothold in the housing market or invest money in real estate for their future.
“The record penalties imposed against both We Buy Houses and Mr Otton reflect their egregious conduct.”
He added, “They have also effectively been permanently banned from any further involvement in real estate in order to protect consumers.”
What did they do?
We Buy Houses and Mr Otton exploited people through free seminars as well as paid boot camps and mentoring programs. They claimed that they could teach their customers:
- How to buy a house for $1 without needing a deposit, bank loan, or real estate experience, or using little or none of their own money
- How to create passive income streams through property so they could quit their day jobs
- How to build a property portfolio without their own money invested, without new bank loans, or any real estate experience
- How to start making an instant profit and create or generate wealth
The Federal Court found these claims false or misleading in August 2017 and the judge presiding the case found that the “free seminars were a waste of time and that the boot camps and the mentoring programs were an expensive waste of time.”
Recent trend of higher penalties
According to Mr Sims, these record penalties against We Buy Houses and Mr Otton demonstrates the determination of ACCC to take strong action against property spruikers who prey on and manipulate consumers.
The judgement also reflects a recent trend of higher penalties for Australian Consumer Law breaches. Mr Sims said, “We can expect this to continue following recent law changes to increase maximum financial penalties under consumer law.”
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This article first appeared on Australian Competition & Consumer Commission’s website.