Providing unsubstantiated rental guarantees for investment properties in a troubled mining town has landed areal estate agency in hot water.
A Perth agency and its directors have felt the wrath of the regulator after making unsubstantiated claims about rental income potential in the town of Newman.
Consumer Protection WA said that Macro Realty and its directors, Desiree Veronica MacPherson and Renee June Smith, have entered an enforceable undertaking to remove guarantees from advertising and refrain from making future guarantees that properties could be leased at a certain rate.
According to the regulator, Macro Realty had no reasonable grounds for guaranteeing that certain properties in the mining town of Newman could be leased at a certain rate.
A spokesperson from the agency told Smart Property Investment's sister publication RPM, "Macro has not intended to nor would it ever intend to mislead people in its business operations; as a company mission to upgrade substandard accommodation in the Pilbara, we put human rights at the forefront of everything we do."
Macro Realty said the real issue is that the Pilbara is an emerging market with fluctuating rental yields.
There needs to be more responsive policy to close temporary workplace accommodation to match short-term requirements in project construction phases, according to the spokesperson.
"Currently there is a huge outcry for this to happen, with public petitions being generated by local residents," said the agency's spokesperson.
"If this transition is not facilitated by the government, investors will be disappointed and deterred, which will in turn lead to setbacks in delivery of their vision, which is to ultimately responsibly accommodate the workforce, and build strong communities."
Acting commissioner for consumer protection David Hillyard said that without sound basis, rental guarantees are misleading and deceptive.
“To give a guarantee of a certain rate of rental income to a prospective buyer of a property, an agent must have reasonable grounds on which to make that prediction,” Mr Hillyard said.
“The undertaking requires Macro Realty to remove the guarantees from existing advertising and not to make guarantees in any future marketing of their properties.”
Mr Hillyard noted that the purchase of a property is a substantial investment for most people, so the decision to buy must be based on true and accurate information provided by the owner or property manager.
”Guarantees can be based on the actual rental income that the property attracted within a recent period of time, but must also make a reasonable prediction of future income based on current market trends,” he added.