A buy-back transaction comprises a number of elements but essentially involves the transfer of land from one person (‘the occupier’) to another (‘the buy-back operator’).  The occupier retains both the right to live on the land and the ability to re-purchase the land at a later stage.

In a buy-back transaction, the buy-back operator provides the occupier with money, or agrees to pay off the occupiers debts.  In return, the occupier transfers the ownership of their home to the buy-back operator on the condition that they can continue to live in the home and that they have an option to buy the home back at a later date.

The CCCF Act requires that the buy-back operator provides information to the occupier regarding a number of matters.  These include:

• the name and address of the transferee;
• money that is payable to the occupier;
• the occupier’s right to live in the home;
• the occupier’s right to repurchase the home;
• the fees and charges payable by the occupier;
• the payments required from the occupier;
• any default fees that are payable; and
• whether the occupier agrees to receive notices in electronic form.

This information must be disclosed before the occupier enters the buy-back contract or transaction.

The buy-back operator must also ensure that the occupier is in receipt of independent legal advice from a lawyer before entering into any such buy-back transaction.  This lawyer must have no relationship with, or interest in, the buy-back promoter.

The Act also provides that the occupier has a right to protect their interest in the land by way of a caveat and that any contract which attempts to prevent the homeowner from doing this shall not have any effect.

A caveat is a warning notice that is attached to the ownership title of the property.  If the occupier lodges a caveat it will show that the occupier still has a legal interest in the property even though it has been transferred to the buy-back operator.

The CCCF Act also includes provisions which allow transactions which the courts consider oppressive to be re-opened.  If appropriate, the courts can alter the terms of the transactions and the rights and responsibilities of the people involved in the transactions.

The fees that are charged by the financier must be reasonable and the court can order that a fee is cancelled or reduced if it believes the fee to be excessive.

Any person involved in a buyback transaction, or the Commerce Commission itself, can take legal action to re-open the transaction.  However, the Commission is not obliged to take this action.

If a financier has a buyback transaction that has been reopened by the courts then anyone may apply to the courts to have the financier banned from being involved in any further buyback transactions.

Penalties
The CCCF Act identifies a number of offences that can be committed by people involved in buy-back transactions.  Anyone convicted of an offence against the Act is liable to a fine of $200,000 or to a sentence of one year’s imprisonment or both.

Any buy-back promoter who breaches the provisions of the Act is liable to a fine of $30,000

The CCCF Act carries other powers including the ability to impose statutory damages on buy-back promoters and other parties to buy-back transactions.

The Commission’s Role and Powers
The Commerce Commission’s role is to promote compliance with the CCCF Act.

The Commission’s functions under the Act are to monitor trade practices in finance markets; undertake prosecutions and civil proceedings; and to make information available to parties involved in these transactions in order to promote compliance with the Act.

In fulfilling its role under the CCCF Act, the Commission has numerous powers, including that of search and seizure; the power to take evidence; and to require people to supply information or documents.

Anyone who believes that they, or someone they know, is involved in a buy-back transaction and would like further information should contact their lawyer or a Community Law Centre/Citizens Advice Bureau in the first instance. 

To contact the Commission in confidence with information about a buy-back scheme, click here.