Richard “Rick” Keith Otton, together with his companies Rick Otton.com Pty Ltd and We Buy Houses Pty Ltd, entered into an enforceable undertaking with Consumer Protection in which he undertook to refrain from conducting his seminars in WA.
He also undertook to refrain from distributing promotional material and promoting his real estate business in WA for a two year period as well as publish information on his websites about how the promoted arrangements operate.
By signing the enforceable undertaking, Mr Otton and his companies have not admitted any wrongdoing under the Australian Consumer Law.
The scheme that Mr Otton teaches involves offering a property seller one dollar for an option to buy their property in the future at a fixed price while offering to pay rent in the meantime. While the seller remains the owner of the property, a prospective buyer then purchases the option on the condition that they pay regular instalments greater than the rent in the expectation that they can secure finance to exercise the option and buy the property outright.
Commissioner for Consumer Protection Anne Driscoll believes WA consumers are being misled in the marketing of this scheme with statements such as ‘buy a house for one dollar’ and ‘profit without initial investment’. In reality, the transaction cannot be completed with one dollar nor without an investment, and the payment of additional rent will not necessarily satisfy a lender to advance the funds necessary to finance the purchase.
Under the agreement, Mr Otton, his companies and three websites must make it clear to prospective buyers in WA that:
- the purchase price for the property must ultimately be paid before they can own the property;
- the one dollar payment to buy the option is only the initial step towards owning the property;
- they may not necessarily satisfy a bank’s lending requirements to exercise the option to buy. Payment of instalments over time may not be proof of creditworthiness; and
- legal advice should be obtained before being involved in a rent-to-buy property scheme.
The Commissioner has raised concerns that the seminars operated by Mr Otton and his companies do not offer anything for free and instead promote training and mentoring courses for a fee.
“These types of seminars highlight to potential investors the benefits of securing their financial future by investing in property, while downgrading the risks. They also appear to exaggerate the potential gains from property and other investments by following the promoter’s programs,” Ms Driscoll said.
“We advise those who attend these seminars to resist the pressure to sign any contracts or pay any fees without first getting proper independent advice from financial advisers and property investment professionals. Consumers should be wary about any ‘get rich quick’ claims being made.”
The additional information Mr Otton has agreed to provide overcomes concerns raised by the Commissioner.
Websites operated by Mr Otton include: