A buy-back transaction is where a homeowner transfers their home (or an interest in their home) to a transferee, who typically pays their debts or gives them money. The former homeowner has the right to continue living in the home and to buy it back at some time in the future.
Under the Credit Contracts and Consumer Finance Act (CCCF Act), the homeowner is referred to as an occupier, and the person they have transferred their home to is known as a transferee. Sometimes the occupier and the transferee are introduced through a third party or broker, called a buy-back promoter.
A buy-back transaction falls under the CCCF Act if:
the occupier transfers (or agrees to transfer) an interest in their home to someone else
the occupier was living in the home at the time of the transfer
after the transfer, the occupier (or someone else they have nominated) has the right to continue living in the home or on a part of the property
there is an agreement between the transferee or buy-back promoter and the occupier that the occupier can buy the home back in the future
the occupier is a private individual who enters into the transaction primarily for investment or for personal, domestic or household purposes.
What rules apply to buy-back transactions?
Before an occupier enters into a buy-back transaction, the transferee must:
give the occupier initial disclosure
make sure the occupier has had independent legal advice.
If the occupier has been introduced to the transferee by a buy-back promoter, and the transferee is not usually involved in buy-back schemes or lending, it is the promoter who must make sure the occupier gets initial disclosure and independent legal advice.
In addition, a transferee must:
allow the occupier to lodge a caveat against the home
continue to provide disclosure if there are agreed changes to the transaction or the occupier asks for it (variation and request disclosure)
not charge unreasonable fees
not include oppressive terms in the contract or treat an occupier oppressively.
Deal with problems as soon as possible
Occupiers who have concerns about their buy-back transactions, or the behaviour of the transferee should act quickly and seek legal advice to address those concerns. The earlier an occupier takes action, the more options they are likely to have to remedy the situation.