SINGAPORE, MAY 7 — Investors who have tried their hand at buying foreign property and got their fingers burnt are finding it tough to get their money back. The process is arduous, especially if it involves a suit against foreign companies, lawyers told TODAY.
In cases involving local agents, buyers can first turn to the Council for Estate Agencies (CEA). Of an average of 800 complaints it receives each year, nine from 2013 to date have been about the purchase of foreign properties, its spokesman said.
These include developers going into liquidation, development not carried out according to schedule and consumers being unable to get deposits back after deciding to withdraw from their purchase. But the CEA did not elaborate on the outcomes of the nine complaints.
The total sum of foreign property transactions is hefty. The Monetary Authority of Singapore has reported that the figure rose from S$1.9 billion (RM5.11 billion) in 2012 to S$3 billion in 2013, before moderating to S$1.1 billion in the first half of last year.
Legal action against foreign companies is rare, said a lawyer, because it concerns investments in foreign jurisdictions, so local firms have their hands tied. Victims would have to engage lawyers from the relevant jurisdictions and many are reluctant to do so because of unfamiliarity with laws there, he added.
Class action suits, involving many claimants, tend to drag on if all parties do not agree on decisions, said another lawyer who declined to be named. He has several clients seeking to recover their monies, including from property firm EcoHouse, which claimed to be working with the Brazilian government on a social housing scheme. The Brazilian Embassy later said its government had no dealings with the firm.
Reports said investments amounted to a minimum of £23,000 (RM124,897) per unit and EcoHouse had promised a 20 per cent fixed rate of return for a 12-month contract. But many investors said they have not received their returns or capital.
Another case involves a local real estate firm promoting properties in the United Kingdom. “They promised Residence A, then ... after you sign the deal, they inform you it’s no longer available and ... offer Residence B,” said the lawyer, adding that the difference between A and B tends to be large. His clients had paid 10 per cent of the property price as a deposit, which was about £12,000.
Recently, he received another case, in which his clients had invested in a fund that owns American properties. They had forked out about US$20,000 (RM108,584) and have yet to receive any payment. His clients are mostly aged 40 to 60, women and non-professionals. “Many are attracted because they say banks’ rate of return is too low, so they’re just looking for ways to get more (money),” he said.
On Monday, the Consumers Association of Singapore urged the authorities to review how foreign developers disclose information to buyers, particularly in advertisements. The Advertising Standards Authority of Singapore also announced that it would implement new guidelines by year-end for ads pertaining to investments in financial instruments and property.
The CEA said estate agents and salespeople must comply with the Estate Agents Act when marketing foreign properties here. If provisions are breached, the possible repercussions include a letter of warning, financial penalties or licence Spension or revocation.
Anecdotally, about 600 to 1,000 foreign property units are sold here each year, said Mr Donald Han, managing director of property consulting group Chestertons. This is in contrast to about 6,000 units from local private home sales. He estimated that fewer than 1,000 local salespeople of the 33,000 registered have experience in marketing foreign projects.
Malaysia is one of the countries investors here have been eyeing. Malacca’s Hatten Group told TODAY its sales personnel ensure buyers understand their rights and commitments before they endorse a document stating the developer’s obligations. “We deliver on the terms as promised, as long as the conditions are met,” said a spokesperson, who added that terms such as price appreciation and rental yields can be delivered, as they are within the developer’s control.
However, the “imposition of taxes and levies ... related to property ownership are very much initiatives by the government authorities and these are beyond our control and estimation”, she added. “Such taxes are usually addressed directly to the owners of the properties and not the properties themselves. Therefore, it is also beyond our means to absorb such costs on an owner’s behalf. However, most investors expect developers to do so.” — TODAY
