About Vendor Finance

Thanks guys for your complimentary maiden posts.

I assume both of you hold your ACL's?

Can you tell me which lenders knowingly accept finance applications where the properties are to be onsold thru a Rent to Buy basis, Instalment Contract or even flipped.

I still stand by what i said (And trust me i have a fair amount of knowledge in the area of IC / RTB / LO / etc etc) that under NCPP you need to be Licensed and for most people this is something that is just not worth it going forward on a individual basis doing the odd deal here and there. 

Cheers

Yours in Finance

Again amazing how many first posts from happy attendees.

Mk escort sorry mate NO neither Rams or Bank West will accept such applications.

Matthew C may i ask you as you have done a few deals do you have an ACL?

Cheers

Yours in Finance

Thanks Paul, and Richard …

I think that it's important to take on the information of those who have been in the business for a while so I appreciate your input and I for one am certainly doing research into credit licensing and membership with VFA etc.

Thanks for the links.

Cheers.

Hi to all,
ASIC has granted us ACL a year ago whilst we were actively conducting Vendor Finance business for 5+ years in Sydney.

We were also assisting people in applying and receiving their ACL with ASIC in the last 12 months and managed to process over 70 ACLs as ASIC lodging agents Australia-wide. 

Our mentors were Rick and Jane Otton to whom we owe our deepest gratitude in changing the way we live our lives.

Firstly to clarify Australian Credit License (ACL) question that has been repeatedly asked in this thread.

Recently enacted legislation National Consumer Credit Protection Act 2009 (Cth) (the Act) has introduced new licensing regime which is in force since 01/01/2011.

Australian Credit License is required for businesses that are involved in credit activities provided to consumers. Alternatively a person or an organisation which is involved in a credit activity (as a business) may become a Credit Representative under a licensee.
 
Otherwise, there are hefty penalties imposed.

For more info on conditions and how to apply for ACL please visit http://www.asic.gov.au/credit .

The real question which has been asked is how this licensing regime impacts Vendor Finance industry including strategies taught by Rick Otton and others.

Answer to this question is not as complicated as it looks.

If there is a credit contract involved somewhere in a transaction where the end consumer obtains a credit (of some kind) it would most likely be regulated under the Act.

These are the usual situations where a financier provides a credit:

• deposit finance
• land or goods payable on installments
• credit-related intermediary services (like mortgage broker or JV partner),
• secured and unsecured personal loans
• credit cards
• commercial leases etc.

'Rent-to-own' transactions have in their core an Option to purchase (a property). Please note that there are multiple types of Options (lease option, reverse option, assumptive option, put and call option etc).

The common thread for all of the Options above is that they ARE NOT credit contracts. Hence the current interpretation by ASIC, government bodies and several large legal firms is that Rent-to-Own do not fall under this legislation.

The main reason for this outcome is that a consumer is not locked into any credit contract and is allowed to terminate his/her option (except for put and call option) without further liability.

In summary: if one conducts their business by exclusively selling properties on an Option (i.e. Rent-to-Own) they would require neither to be licensed nor to become a representative of a licensee.

Note: the relevant legislation is subject to frequent amendments and changes so this position may be revisited in the future.

And of course if in doubt: please seek a legal advice or call ASIC!

BTW as an accredited mortgage broker I am happy to say that there are few lenders who would finance of the back of a Vendor Finance transaction. We have done this several times in the recent 2 years however I would leave this topic for different discussion.

All the best and many happy deals!

Jovan Sarai
Yes Homes Pty Ltd
[email protected]

Hi Paul

Refinancing the Instalment Contract a couple of years down the track has not and is not the issue the issue comes when the original buyer / investor purchases the property with a view to imediately onselling the property thru an IC.

We have all of our remaining IC thru one of the majors done at National level in Melbourne due to the number and volume but this is totally against their Credit policy as it is the Policy of most lenders. Course there is always the odd local manager who slips the deal thru on the QT however non that i am aware of that openly offers such a product to investors.

As always i am keen to be proven wrong just never found a lender yet that officially allows the deal with Full Disclosure of what is happening.

Cheers

Yours in Finance

Hi Stuart

This might help http://www.asic.gov.au/asic/asic.nsf/byheadline/Do+I+need+a+credit+licence%3F?openDocument

Cheers

Yours in Finance

Thanks to Richard and SGermain for your comments.

SGermain may I ask where you are getting your training from, how much does it cost and how long does it take to become certified?

regards

Stuart

Hi All

Getting ACL coverage via the Credit Representative path does have it's limits as the legislation requires all Credit Representatives to act "on behalf of" their Licensees.  It's worth looking at what this limitation means, with regard to the "provision of credit" and the "provision of credit assistance".

If you provide credit, in the course of a business, Credit Representative status does not give you ACL coverage for that transaction, as it is you that is providing the credit not your Licensee.  If you, in the course of a business, are the lender on a consumer credit contract, you need an ACL that includes the authority to provide credit.  This also applies to real estate Instalment Contracts, i.e. the vendor is providing credit.

If you provide credit assistance, Credit Representative status allows you to give this assistance on behalf of your Licensee.  This means you cannot act independently.  Practically this means you must conduct all credit assistance transactions on behalf of your Licensee, on their paperwork.

ASIC have written a lot in explanation of the term, "in the course of a business".  An overview of this subject is available at:  http://www.screencast.com/t/uDWQu5MDIN5m

However, in summary, a specialist vendor finance lawyer in one State believes you will not be regarded as being "in the course of a business" if you sell one property, you own, with a vendor finance credit contract.  In another State, another specialist vendor finance lawyer believes you may be able to sell 3 to 4 of your own properties with a vendor finance credit contract, without being regarded as "in the course of a business".

As the National Consumer Credit Protection Act is relatively new, there is no case law to help firm up opinions on "in the course of a business" at this point.  My best advice is to make sure you get advice on the above subjects from your lawyer.

Cheers, Paul