Dominique Grubisa claims that “there is a misconception that taking over distressed properties is preying on struggling families”, and she says that buying a property from a financially distressed owner doesn’t make you a “vulture”. See other posts about Dominique Grubisa / DG Institute.
This is not a legal question, but an issue of your ethics and values. I don’t think buying a house cheaply makes you a “vulture”, but my view is that taking advantage of an owner’s vulnerability, ignorance and/or trust is preying on them – and some of Grubisa’s teaching encourages that.
There are many others profiting from distressed home owners – not just Dominique Grubisa students. Once a bank issues repossession proceedings, the owners are contacted by numerous businesses (>10 letters is common) wanting to profit from their situation, including a number from Grubisa students competing for attention. Some of these businesses hope to find a cheap property, others want to offer various services (including debt negotiation), often taking a caveat over the property so they are paid when it is sold. Many of these are labelled “debt vultures” by consumer advocates.
So what, in my view, could make a ‘distressed property’ deal unethical?
Dominique Grubisa and her companies offer a range of courses and products, including a course on finding ‘below market value’ properties and negotiating deals with distressed sellers (which I write about here), a renovations course, debt management, legal services, loans, insurance – and her Master Wealth Control (MWC) product which purportedly protects your wealth from governments, bankruptcy, banks, individuals and creditors.
This MWC product (costing about $10,000) has ‘found its moment’ during the COVID19 pandemic. Unlike some other DG Institute (DGI) products, it doesn’t rely on live seminars, and COVID provides just the right environment to increase people’s anxiety and sell a solution.
Read an overview of my concerns about Grubisa’s Real Estate Rescue technique here.
This post considers some issues in more detail.
These are my views on some content of Grubisa’s seminars and videos.
Grubisa is a lawyer – I’m not – but these issues may raise questions that you want to check with Grubisa – or get your own legal advice about.
Grubisa promotes the fact that some of her strategies are new, for example she says about her Real Estate Rescue program “The process has never been taught or practised before in Australia”. When there is an unusual application of any law, it can mean that it has not been thoroughly tested in a court, and therefore the legal situation may be unclear.
Some strategies are presented in a way that links them to recent legislative reforms.
National Consumer Credit Code (NCCC) Regulations (2009)
Grubisa mentions the NCCC in relation to her “takeover” strategy – which involves students locating “motivated” vendors, controlling the property by way of an irrevocable power of attorney, a signed blank land transfer and other documents; and taking over mortgage payments until the house is sold for a price determined by the student.
On 15 November 2018, Rick Otton and We Buy Houses received the highest penalties ever imposed in Australia for breach of Australian Consumer Law.
The Federal Court imposed penalties totalling $18 million against We Buy Houses Pty Ltd (We Buy Houses) and sole director, Rick Otton, for making false or misleading representations about how people could create wealth through buying and selling real estate, following ACCC (regulator) action.
A $12 million penalty was imposed against We Buy Houses, and $6 million imposed against Otton personally. The penalty followed a Court hearing in August 2017 .
I have not attended a DG Institute (DG) seminar, however I have concerns that her students (“investors”) may be entering into complex financial arrangements with distressed house owners, and may have a grossly inadequate understanding of the owner’s situation and options, and possibly of the risks they face themselves.
I maintain this view despite references in DG information to “helping” owners, ensuring the owner has done “everything possible to keep their home from being repossessed”, and being “fair minded and genuinely want[ing] to help property owners solve their financial problems while earning a fair and reasonable profit in return”.
I base my comments on:
some of the information provided by DG online (including videos),
a manual DG has provided to students in relation to the Real Estate Rescue program, and
my background in consumer credit & debt advocacy.
I’m not a lawyer, but I have worked in policy and executive roles in the community legal sector for over 20 years, mainly in specialist consumer and debt legal services. Many of my colleagues are lawyers who specialise in credit, debt and consumer law, assisting clients by negotiation, in the Australian Financial Complaints Authority (AFCA, formerly Financial Ombudsman Service), and in courts and tribunals.
DG has been teaching property investment and wealth strategies for some years. She says that after the global financial crisis she went from “many millions of dollars in wealth” to “many millions in debt”. Continue reading →
‘Damage waiver” in car hire contracts isn’t insurance, doesn’t cover some types of accidents and can leave drivers exposed to huge bills
Excess insurance may be of little, or no benefit, if the ‘damage waiver” doesn’t cover you
While many insurers sell “excess insurance”, I only found one which insured the whole vehicle.
I don’t guarantee the accuracy of this information which is intended to provide general information only and does not constitute legal advice. The information relates to Australia.
When driving a hire car, you are probably driving uninsured – whether or not you pay for excess reduction. (This may not apply to car share schemes which have different arrangements).
Take Susan and Roy. They recently hired a car in New Zealand, and made a point of paying for “excess reduction” cover. While driving on a narrow road, Susan briefly lost concentration and the car crossed to the other side of the road and slipped into a ravine.
Luckily, no-one was hurt, but Susan and Roy found that they were liable for the full cost of the car (a write-off) under the car hire agreement because the “collision damage waiver” provided by the car hire company excluded any accident if the driver was charged with “an infringement/offence”. Police attended the accident and Susan was fined for crossing double lines.
They were also held liable for the cost of recovering the vehicle, which was significant. They couldn’t even claim the $4,000 excess cover because the ‘offence’ exclusion applied to that too. Continue reading →
On 11 August 2017, the Federal Court found that Rick Otton, and We Buy Houses (WBH) (referred to as “the respondents” below) engaged in conduct which was misleading or deceptive or was likely to mislead or deceive in contravention of the Australian Consumer Law.
In March 2015, after a co-ordinated investigation with NSW Fair Trading, the Australian Competition and Consumer Commission (ACCC) issued proceedings against Rick Otton alledging misleading and deceptive conduct. At the time, the Chairman of the ACCC said the ACCC was concerned about strategies promoted by We Buy Houses and Otton which “target vulnerable consumers who don’t qualify for bank loans or who are having difficulties meeting their mortgage repayments”. Rick Otton is the sole director and sole shareholder of WBH. Since that date, Otton appears to have ceased doing business in Australia, but has been promoting, and running seminars, in the UK.
An 8 day court hearing was held in 2016, and on the 11th August 2017, Justice Gleeson handed down the court’s decision. (I understand that further decisions are yet to be made in relation to penalties, injunctions and costs).
A former Rick Otton student, and witness in his Federal Court case, lost a lease-option case in Supreme Court of NSW (Australia) in December 2016. The case shows, once again, the risks faced by owners, buyers – and even ‘creative property’ businesses – when entering lease option agreements.
Karin Siekaup is a former Rick Otton student, and the only former student who gave evidence for Otton in defending a misleading and deceptive complaint brought by the regulator (ACCC) in Australia. [Update: In August 2017 the Court found that Otton had engaged in misleading and deceptive conduct. It appears that Siekaup’s evidence in support of Otton involved two property deals – the two mentioned here which “fell over”.]
“Siekaup is the sole director of Sieve-Storm Pty Ltd,” and for the purposes of this article I refer to her by name rather than to the company, noting that the judge said “her mind must relevantly be the mind of Sieve-Storm”
Siekaup entered into two lease option agreements for two homes with the same owner, and appears to have ‘onsold’ the properties to third parties via lease options. Around the time Siekaup tried to exercise the options, and thereby buy the properties for the initial agreed amount, the owner claimed that the documentation didn’t comply with NSW law, and cancelled the option agreements. Siekaup tried to claim compensation from the owner but the court confirmed that the owner had the right to cancel the options, that Siekaup wasn’t entitled to compensation and ordered that Siekaup pay the owner’s legal costs. Continue reading →
In this post I consider some examples of rent-to-buy houses (lease options) which were provided by the people who promote them. Even these positive examples offer very little benefit to an unsophisticated ‘buyer’ in exchange for significant financial risk.
It appears that the only ‘buyers’ who have a hope of eventually owning a lease-option house are those who can afford to pay rent and put aside enough for a house deposit over 2-3 years – that is those who could own their own home without a lease option.
A lease option is combination of a lease (property rental) and an ‘option to purchase’. The ‘option to purchase’ gives the tenant the right to buy the property for an agreed amount before the end of the term of the contract (usually 2-5 years). While some people in the industry have concerns about the use of lease options, they appear to be widely used.
The tenant pays a fee for the option to purchase. The option fee is made up of an upfront “deposit” and monthly payments. The total option fee may be between $20,000 – $70,000 or more. Rent is paid in addition to the option fee. The rent amount is unlikely to be below ‘market rent’ and is often higher.
If the purchase proceeds, the option fee (or sometimes just part of the option fee) is credited towards the purchase.
Some of the other risks for potential “buyers” are:
Paying an amount that often equals double rent, and paying rates and maintenance, may not be sustainable for the ‘buyer’;
The ‘buyer’ may not be approved for mortgage finance at the end of the period, which usually means the buyer will usually lose the entire option fee paid;
If the seller has outstanding debts, the house could be sold by creditors, and the ‘buyer’ may lose all payments made (lease options are sometimes promoted to sellers with debt problems, so it’s not unusual for “sellers” to be in financial difficulty).
The complexity of these agreements makes it easy for a seller, or intermediary, to exploit someone who hopes to own their own home. Unfair elements of contracts may include:
above market rent (in addition to the option fee);
high option fee (both up-front payments and monthly payments);
only part of a large option fee may be credited towards the price of the house;
it may be foreseeable at the time of signing the agreement that the tenant will never be able to purchase the property.