Australia’s consumer watchdog has scored a legal victory against a property spruiker who made false claims about real estate investment.
The Federal Court has found that We Buy Houses and its sole director, Rick Otton, “made false or misleading representations in promoting a number of wealth creation strategies involving real estate”, according to the ACCC, which initiated the legal action.
The court found that We Buy Houses did not have a reasonable basis for representing that, by following its strategies, consumers could:
- Buy a house for $1, without needing a deposit, bank loan or real estate experience, or using little or none of their own money
- Create passive income streams through property and quit their jobs
- Build a property portfolio without their own money invested, new bank loans or any real estate experience
- Start making profits immediately and create or generate wealth
False claims, false testimonials
We Buy Houses failed to sufficiently inform consumers that its strategies could only realistically be successfully implemented by a consumer who already owned real estate, or who was able to finance a bank loan, according to the ACCC.
“The court also found that Mr Otton had made false or misleading representations that he had successfully implemented the wealth creation strategies he taught,” it said.
“In addition, a book authored by Mr Otton, and websites operated by We Buy Houses and Mr Otton, included testimonials from ‘students’ claiming they were able to buy a house for $1 which the court found were false or misleading.”
We Buy Houses raked in millions of dollars
ACCC deputy chair Delia Rickard said We Buy Houses “sold a lie to vulnerable consumers” that home ownership could be achieved easily through strategies taught by Mr Otton.
“Around 2,000 consumers spent around $3,000 per ticket to attend Mr Otton’s boot camps, and approximately 700 consumers participated in the mentoring program at a cost of up to $26,000,” she said.
“Consumers who attended We Buy Houses seminars, boot camps and mentoring should be aware that, in her judgment, Justice Gleeson stated that for ordinary consumers seeking to achieve the outcomes represented by We Buy Houses and Mr Otton, the free seminars were a waste of time, and that the boot camps and the mentoring programs were an expensive waste of time.”
Justice Gleeson described Mr Otton as “a very unreliable witness who was prepared to maintain or defend statements that were obviously untrue or misleading”.
ACCC preparing further legal action
The ACCC instituted proceedings against We Buy Houses and Mr Otton in March 2015 following a coordinated investigation with NSW Fair Trading.
The ACCC alleged breaches of the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001. The Federal Court concluded that the conduct was within the ambit of the ACL, not the ASIC Act.
The ACCC will now prepare the matter for a hearing seeking relief against both We Buy Houses and Mr Otton, including penalties, and a disqualification order against Mr Otton.