Is Rent-to-Own Safe in NSW and Queensland?

Is rent-to-own legal and safe in NSW and Queensland?

Yes, rent-to-own is legal in New South Wales and Queensland. Whether it is safe depends on how it is set up. The arrangements consumer bodies warn about are private deals with no licensed agent, no standard documents and no independent legal advice.

Legal Aid NSW's brochure on rent-to-buy home purchases lists five warnings. This guide takes them one at a time. PublicSquare is a licensed real estate agency (QLD Licence 4555627, NSW Licence 10152702), and under Rent-to-Own we act for you as your buyer's agent.

Do I legally own the home while I rent-to-own?

No, and no honest provider should tell you otherwise. The owner holds the title until you buy. What you hold is a Call Option Deed: the exclusive, legally secured right to buy the home in years 4 to 8, with no obligation to.

You live in the home under a standard state tenancy agreement, so tenancy law covers you as a tenant. Registering your lease on the title is optional. It is permitted under the Contract Between Buyer and Seller, and it is worth asking your solicitor whether it is right for you.

Are there hidden fees and charges?

Every cost is published before you sign up. These are the costs under PublicSquare's program:

• PublicSquare's buyer's agent fee: $15,000 to $25,000 + GST in total on Standard, spread over 260 equal weekly instalments over 5 years, with no interest and no lump sum.
• A $325 + GST ($357.50) signing fee when you sign your buyer's agent appointment. It is non-refundable and credited against your first instalments.
• Independent legal advice, which is required. Any solicitor typically charges $2,000 to $3,000; our pre-arranged referral is an independent law firm for $1,100 including GST.
• A rental bond under your tenancy agreement, as with any tenancy.
• Each week, the listed rent plus a contribution of 50% of the first year's weekly rent. The contribution never changes, and it is credited to you as your deposit when you buy.

The owner pays maintenance and repairs, council rates, building insurance and body corporate. How Rent-to-Own works sets out the costs in full.

Will I pay more than the home is worth?

You can never pay less than the contracted minimum price, and you should understand that before you sign. The minimum is set by applying a growth rate to the home's initial value for the completed years before you buy:

• Buy in year 4: the minimum price grows at 8% a year
• Buy in year 5: 7% a year
• Buy in year 6: 6% a year
• Buy in year 7: 5% a year
• Buy in year 8: 4% a year

At purchase, the price is the higher of that minimum or an independent, certified valuation. If the market grows more slowly than your minimum, you would pay above market value. That is the main trade-off of the program. These rates are for houses; apartments may have lower minimum growth rates in the contract.

Who do I deal with if something goes wrong?

Legal Aid warns that the seller is often a different party from the rent-to-buy business, which can make disputes hard to resolve. The seller is a separate party here too, and each role is defined:

• Your Contract Between Buyer and Seller and your Call Option Deed are with the owner.
• The home stays with the owner's licensed property manager, under a standard tenancy agreement.
• PublicSquare acts for you as a licensed buyer's agent. The owner never pays our fee.

Do I have the same protections as a bank home loan?

No. Rent-to-Own is not a loan, so the consumer credit laws that cover home loans do not apply to it. Your protections come from three places:

• State tenancy law, which covers you as a tenant for as long as you rent the home.
• The Contract. If the owner sells or transfers the home in breach of it, they must repay all your contributions plus a $10,000 relocation fee, and further damages may apply. Owners must keep at least 20% equity and give personal guarantees.
• The owner's Sell-Back Guarantee. If you cannot get finance, you can request an open-market sale from year 4.

Independent legal advice is required before you sign, from a solicitor you choose.

What can still go wrong with rent-to-own?

Rent-to-Own carries real risks, and you should weigh them before you start:

• Your weekly cost is higher than plain renting, because you pay the listed rent plus the contribution.
• Your contributions are paid to the owner each week. They are not held in trust.
• You still need a mortgage to buy the home, usually in years 4 to 8. PublicSquare does not arrange mortgages.
• If you request a sale under the Sell-Back Guarantee, you pay a fixed $3,300 marketing cost. At settlement you receive your contributions, less any weekly payments still outstanding and any shortfall if the sale price is below your minimum price.
• The signing fee is non-refundable.

What should I check before signing a rent-to-own contract?

Ask these five questions of any rent-to-own provider, including us:

• Is the provider a licensed real estate agent in your state? Ask for the licence number and check it.
• Who does the provider act for: you, or the seller?
• Is the way the purchase price is set written into the contract, with the numbers for each year?
• Exactly what happens to your payments if you cannot get finance, or decide not to buy?
• Has a solicitor with no connection to the provider or the seller read the contract?

Written by

Jarrod Wills

Buyer's Agent

Licensed agent · Former mortgage broker

Over 10 years’ experience as a mortgage broker and real estate agent, now a licensed buyer’s agent with PublicSquare since 2021. He has worked on 100+ property transactions and knows the Queensland and New South Wales markets and the Rent-to-Own model well.

Reviewed by

Dean Arnold

Founder & CEO

Licensed real estate agent

I started PublicSquare in 2021 to give homebuyers a real path to ownership without a deposit, and landlords a stronger-cashflow alternative to a standard rental. I hold real estate licences in Queensland and New South Wales and personally review every property that enters the program.

Read more about Rent-to-Own.

This article is general information only and does not take your personal circumstances into account. PublicSquare is a licensed real estate agency, not a financial adviser or credit provider. Consider seeking independent advice before making a decision.