A record $18 million fine has been imposed against property spruiker Rick Otton and his company We Buy Houses after court action by the consumer watchdog.
The record fine was handed down by the federal court for misleading investors about how they could make money buying and selling real estate.
Otton and his company claimed that people could buy houses for just $1, without needing a deposit, bank loan or real estate experience, or using little or none of their own money.
We Buy Houses had been had been running free seminars, boot camps and mentoring programs throughout Australia since around 2000.
Between 2011 and 2014, We Buy Houses generated the majority of its $20 million revenue from these training programs.
The Australian Competition and Consumer Commission said the penalties of $12 million imposed against We Buy Houses, and $6 million imposed personally against Otton, are the highest ever imposed for contraventions of the Australian Consumer Law by a corporation and an individual.
Otton and his business We Buy Houses are permanently banned from any further involvement in real estate. He is also banned from managing corporations in Australia for 10 years.
Otton was not in court in Sydney last week for the penalty decision.
The $18 million fine follows an in-depth investigation that began in 2015 by the ACCC.
ACCC Chair Rod Sims said the record penalties reflect “egregious conduct” of We Buy Houses and Otton.
“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,” Sims said.
“The judgment signals the Court’s condemnation of false and misleading property spruiking and get rich quick schemes.”
Property Investment Professionals of Australia’s Peter Koulizos said the case proves urgent regulation of property investment advice is needed.
“That’s because there isn’t any property investment advice regulation, which creates a breeding ground for greed and poor behaviour, with the general public the ultimate victim,” Koulizos said.
Koulizos said property investment was a long-term wealth creation strategy, with most successful investors owning property for 20 years or more, so anyone promising short-term profits was a spruiker, not an expert.