Courtney and Will
of Victoria attended a free public seminar sponsored by a
leading real estate agency to learn about property investment.
They particularly wanted to make money from property investment
to enable them to care for their disabled child and to assist
with Courtney’s elderly father’s expenses.
In July 2001, they paid approximately $5,000 to attend a property
investment course conducted by a company specialising in investment
education and subsequently paid that organisation another
$2,500 as a "source fee" to entitle them to buy
investment apartments at "discounted" prices - the
wholesale prices being at least $5,000 below "market
Mid-way through their property investment course they inspected
an apartment complex with a representative of the vendor and
the education company. They eventually decided on a particular
apartment. They were given a detailed "property investment
analysis" for the unit showing various capital growth
and other projections. A 2 year 6% rental guarantee was also
included in the deal.
They were shown a Certified Practising Valuer’s valuation
stating that the apartment was worth $630,000. The apartment
was available for sale to them as course participants of the
investment property education company at the "discounted"
price of approximately $570,000 providing they signed the
contract without delay.
They purchased the unit relying on the fact that they had
been promised a way of making a quick and sizeable profit.
They also relied upon the vendor’s capital growth profit
projections and the mistaken belief that the rental guarantee
was transferable to the next purchaser.
They were led to believe that they could make a substantial
profit on re-sale of the unit in a short time.
They did not know that the $630,000 valuation had been conducted
before the unit was even constructed. The vendors had a second
valuation which valued the unit (post construction) at $587,000.
The purchasers were not shown this document until after they
had signed the contract.
The purchasers prior to settlement arranged their own sworn
valuation which indicated that the unit was then worth $515,000.
A recent inspection by a Jenman agent states that the unit
is probably only worth in "the high $400,000s".
Additionally, the total area of the unit / balcony was over-stated
by the vendor’s agent.
The purchasers’ conveyancing solicitor was recommended
to them by the investment property education company. The
director of that company is also a director of the company
which brokered the necessary finance for the purchasers. The
conveyancing solicitor at the relevant time also conducted
legal seminars for the investment education company.
The conveyancing solicitor appears not to have been able to
recognise the potential for conflict of interest in representing
the purchasers and the investment education company at the
same time. The law firm provided advice to the purchasers
when they tried to cancel the contract. That advice may have
breached the lawyer’s obligation to avoid conflict once
the purchasers complained about the actions of the investment
education company and the finance broker.
Legal opinion has been obtained as to the prospects of initiating
actions against the property investment education company,
the finance broker, the vendor and the vendor’s agent
for various possible breaches of the Estate Agents Act 1980
(Vic), Trade Practices Act 1974 (C’th) and the Fair
Trading Act (Vic).
A complaint against the conveyancing solicitor is also being
considered for filing with the relevant authority (Legal Ombudsman,
Recognised Professional Association or the Legal Practice
Detailed statements are presently being taken from the purchasers
and other parties with the intention of progressing those