In 2021 Manaia’s job was relocating from Dunedin to Christchurch. Manaia owned a property, with a mortgage, in Dunedin. Manaia wanted to keep the Dunedin property, and rent it out, and buy a new build home in Christchurch. Manaia needed $80,000 as a deposit on the new build.
Manaia asked a financial adviser if he could borrow $80,000 to pay the deposit on the new build. The financial adviser was confident he could help Manaia borrow the $80,000, secured against the Dunedin property. Both Manaia and the financial adviser were confident that, by the time Manaia needed to pay $720,000 to buy the Christchurch property, both properties would have increased in value and Manaia would be able to keep both properties.
The financial adviser approached Manaia’s existing bank for a $80,000 top-up on Manaia’s existing home loan to pay the deposit. Unfortunately, the bank declined to lend. Manaia emailed his financial adviser saying that he thought it would be best to sell the Dunedin property.
Manaia’s financial adviser said that he was sure he could help get the finance without having to sell the Dunedin property. The financial adviser suggested that Manaia lie about the purpose of the loan. Instead of saying he wanted the money as a deposit on the new build, the financial adviser suggested that Manaia tell the lender that he wanted the money to buy an $80,000 car from his parents. Manaia said that he trusted the financial adviser, so asked his parents to also lie and say they were selling their $80,000 car to Manaia.
The financial adviser went to another bank and submitted the loan application for an $80,000 car. The bank approved the loan and Manaia was able to pay the deposit on the new build.
In 2023 the new build was complete, and Manaia went back to his financial adviser who applied to Manaia’s existing bank for a loan of $720,000 to complete the new build purchase. The bank declined the loan.
After failing to resolve the problem with the financial adviser Manaia complained to FSCL, concerned he would be unable to purchase the Christchurch property and would lose his $80,000 deposit. Manaia was already late in settling the purchase.
Dispute
Manaia agreed he had contributed to the situation by lying to his lender. Manaia also felt terrible for bringing his parents into the lie. However, Manaia said that he was happy to sell his Dunedin property so he could buy the Christchurch property and it was his financial adviser who had encouraged him to lie so that he could keep, and rent out, the Dunedin property. Manaia was able to back this up with emails between him and his financial adviser.
Manaia had been trying to sell the Dunedin property for most of 2023, but without success.
The financial adviser agreed that it was his idea for Manaia to lie to the bank. The financial adviser said that he had never done anything like this either before or since. The financial adviser said that he really wanted to help Manaia to keep the Dunedin property as well as to buy the Christchurch property and, on his calculations at the time, this was achievable. Unfortunately, market conditions had changed, and the financial adviser was now unable to get Manaia a loan that would allow him to keep both properties.
Review
At around the time the complaint came to us, Manaia put his house on the market again, with a deadline sale in three weeks.
While waiting for the property to sell, the financial adviser negotiated with the property developers who were selling the Christchurch property, to not charge Manaia any penalties associated with the delay while Manaia tried one more time to sell his Dunedin property. The financial adviser also managed to get a loan offer from a bank, conditional on Manaia selling the Dunedin property, that would enable him to buy the Christchurch property.
Resolution
Manaia received a conditional offer on the Dunedin property, but the offer was $40,000 short of the amount Manaia needed to buy the Christchurch property. Manaia agreed to contribute $12,000 from his savings and the financial adviser offered to contribute $28,000. The offer to buy the Dunedin property went through, allowing Manaia to buy the Christchurch property, resolving his complaint.
Insights
It was very concerning to see a financial adviser suggesting that a client lie to a lender. Although Manaia knew he should not have lied, we considered the financial adviser carried more responsibility and that the resolution negotiated between the parties was reasonable.
We were pleased that the financial adviser recognised his error and worked with Manaia to put things right.
