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Your rights with home buy-back schemes and the need to get independent legal advice.

A complicated credit arrangement

Home buy-back schemes are schemes where you sell your family home to someone else (the transferee). The transferee pays your debts or gives you money, and you have the right to occupy the home in return for rent.

You may be introduced to a buy-back scheme through a third party or broker called a ‘buy-back operator’ or a ‘buy-back promoter’.

You can repurchase the house at some future time at a specified price, but there is often a large fee included.

Lastly, your main purpose for arranging this finance must be primarily for personal, domestic, household or investment purposes.

A home buy-back scheme is not a loan – it is a complicated credit arrangement. Check to see what documents you are being asked to sign. In particular, look out for any document headed ‘Agreement for Sale and Purchase’ and any documents that contain the words ‘option to purchase’ or ‘licence to occupy’ for your home.

Often the buy-back operator will arrange legal advice and get you to sign that the advice was independent. Legal advice from a lawyer arranged by the buy-back operator may not be as full and frank as advice from a completely independent lawyer.

Know your rights

Essentially, a buy-back scheme is treated as a credit contract with special rules for your protection under the Credit Contracts and Consumer Finance Act (CCCFA).

You must:

  • be given a copy of all the terms of the transaction before you enter into it
  • be given the chance to obtain independent legal advice before you enter into any contract or arrangement forming part of the buy-back scheme.

Independent legal advice means:

  • the lawyer has no relationship with or interest in the transferee or any buy-back promoter
  • your signature is witnessed on every document forming part of the transaction
  • you get appropriate legal advice including being warned about the risks inherent in these schemes (eg that you may lose your home)
  • you get information about lodging a caveat to protect your interests.

You have the rights to:

  • lodge a caveat, which is legal notice on the title that you have an interest in the property and means it cannot be sold, mortgaged or otherwise dealt with unless the caveat is removed
  • get full disclosure if there are agreed changes or you ask for it
  • not be charged unreasonable fees
  • not have oppressive terms in the contract or be treated oppressively.

The way schemes are designed can mean you will find it very difficult to repurchase your home in the future.

Once you have sold your house under a buy-back scheme, the person who purchased it from you may sell it or raise a mortgage over it, unless you have registered a caveat. If the new purchaser or the mortgage provider doesn’t know that you still have a legal interest in your home, their interest in the land may override yours. In effect, you may lose your home.

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.

See also:

Contact your advisor

If you have a complaint or dispute about your home buy-back scheme, you should discuss this with the local manager or ask for the person responsible for handling complaints.

See also:

Next steps

If you are unable to resolve your issue directly with the financial adviser, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Banking, finance and insurance

Need more help?

Contact us for more guidance.

Common situation

Home buy-back scheme

Mark needs to realise some capital out of his home, so he decides to do a home buy-back scheme after talking to an advisor who will be the transferee. He is told to use a particular lawyer and is not advised to take out a caveat to protect his home. The transferee then takes a mortgage out on the house to borrow money for a loan that he defaults on. Mark finds out from a notice sent by the bank to the occupier and he is unable to claim his ownership rights against the bank. He can make a complaint to the advisor and then to their Dispute Resolution Scheme about the advice given.